· 2020-07-10 · 3 1. opening and formation of the presiding board, 2. reading and discussion of...

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2018Faaliyet Raporu

ANNUAL REPORT

2019

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As the outward oriented face of Turkey in our sector, we make 17% of the cement export of Turkey. Thus, while connecting to the world, we offer high quality Turkish cement to the world market.

We always use our resources consciously based on sustainability, and we connect to our unique world by supporting Turmepa.

AKÇANSA, a Door to the World

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ContentsAgenda

Achievements and Awards

Plant Capacities

Financial and Operational Indicators

Chairman’s Message

Board of Directors

Executive Committee

Sector Information

Sales

Production

Occupational Health and Safety

R&D Activities

Social Responsibility

Akçansa’s Human Resources Strategy

Independent Auditor’s

ReportCorporate Governance Principles Compliance Report

Pro it Distribution Table

Contact

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1. Opening and formation of the Presiding Board,

2. Reading and discussion of the 2019 Annual Report of the Board of Directors,

3. Reading the 2019 Auditor’s Report,

4. Reading,discussionandapprovalofthe2019financialstatements,

5. DischargeofBoardofDirectorsfromliabilityforthe2019financialyear,

6. Determiningthemannertousethe2019profits,andthedividendandgainrates,

7. Determining the salaries and the rights such as attendance fee, gratuities and bonuses of the Board Members.

8. Submitting for the approval of the General Assembly the elected members to serve for the remaining duration in the board of directors posts during the operating year,

9. Selecting the auditor,

10. Providing information to the General Assembly regarding donations and grants made in 2019 and approval,

11. Setting the donation limits of the company in 2020,

12. Authorizing the Chairman and Members of the Board of Directors to perform the written procedures stated in Articles 395 and 396 of the Turkish Commercial Law (TCL).

13. Wishes and Requests

March 25, 2020 Time: 10:00

Agenda for the OrdinaryGeneral Assembly in 2019

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Akçansa crowns its achievements with national and international awards.

Achievements and Awards in 2019

• Akçansa received the “Turkey’s Most Admired Company” award in the cement sector for 18th time in the “Turkey’s Most Admired Companies 2019” survey organized by Zenna Research and Consultancy and Capital Magazine.

• People oriented management culture and employee related investments of Akçansa were rewarded with “Gold Standard” by Investors in People (IIP).

• In the “Turkey’s Biggest 500 Industrial Enterprises” survey conducted by Istanbul Chamber of Industry in 2018, Akçansa ranked 112nd in the list created with the analysis of numerical data of companies.

• Kemerburgaz Ready-Mixed Concrete Plant is awarded with CSC “Responsible Sourcing Certificate” in line with the rules set by the Concrete Sustainability Council.

• Akçansa Çanakkale Plant received ‘Cement Sector Occupational Health and Safety Performance Award’ as a result of the survey held by Cement Industry Employers’ Association (ÇEİS) OHS Committee on the cement production plants in Turkey.

• Within the scope of “IMSAD Turkey Investing in the Future Awards” where sustainable best practices are evaluated, Akçansa received an award in the Social Domain category with its “Concrete Ideas Project Competition”.

• Akçansa increased its rating from D in 2018 to B, ranking over the average of all sectors in the world, with the progress it has displayed in the CDP Climate Change Program.

• The “Annual Report” providing information on the operations of Akçansa in a 3D digital universe, the “Akçansa Port Website” designed with an insight gained from user behaviors, and the “Betonsa Instagram” account with its “Add Color to the City” project received an award in the Galaxy Awards, one of the most prestigious awards of the business world.

• With its “betondafarkindalik.com” blog, Akçansa received Bronze Stevie Award in the “Best Overall Web Design in Europe” category in the International Stevie Business Awards, recognized as the world’s most prestigious business competition.

ACHIEVEMENTS AND AWARDS

Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi

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2.009,8Total Assets (million TL)

Net Sales (million TL)1.826,1With its successful performance, Akçansa continues creating value for its stakeholders.

Shareholding Structure Hacı Ömer Sabancı Holding A.Ş.

% 39,72

HeidelbergCement AG

% 39,72

Other - Public

% 20,56

PLANT CAPACITIES Metric Tons/Year

İstanbulBüyükçekmece

Trabzon

Hopa

Kocaeli Derince

TekirdağM. Ereğlisi

Aliağa

Yalova Yarımca

Karçimsa

Samsun Ladik

İstanbul Ambarlı

Cement Production Capacity 2,527,776 Clinker Production Capacity 1,943,000

Cement ProductionCapacity 1,014,000Clinker Production Capacity 643,500

Operating Capacity500.000



Operating Capacity 500,000

OperatingCapacity225.000 Operating Capacity

384.000Operating Capacity700.000

Cement ProductionCapacity 200.000

Operating Capacity 746,000

ÇanakkaleCement ProductionCapacity 5.500.000Clinker Production Capacity 4.450.000

Production Capacity

9,2 (million metric tons) Cement

(million metric tons)Clinker7


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Net Sales(million TL)

Total Assets(million TL)

2015 2016 2017 2015 2016 2017 2018 2019

1.46

8,5

1.46

1,1

1.51

9,0

2018

1.71

5,6

2019

1.82

6,1

1.70

5,1

1.84

3,2

1.91

6,2

2.16

0,5

2.00

9,8

Financial operational indicators


Sales (million metric tons) 2015 2016 2017 2018 2019Total Cement- Clinker 7,6 7,9 8,0 7,1 7,2

Cement - Total 6,9 7,5 7,6 6,5 5,2Domestic 6,2 6,4 6,6 5,5 3,6Abroad 0,7 1,1 1,0 1,1 1,6

Clinker - Total 0,7 0,4 0,4 0,6 2,0

Domestic 0,0 0,0 0,1 0,0 0,0

Abroad 0,6 0,4 0,3 0,6 2,0Ready-Mixed Concrete (million m3)

4,4 3,9 3,4 3,0 2,2

(million TL)Net Sales 1.468,5 1.461,1 1.519,0 1.715,6 1.826,1

EBITDA 429,8 407,9 308,5 354,3 244,6

EBITDA Margin (%) 29,3 27,9 20,3 20,7 13,4EBIT 358,8 332,8 225,5 270,1 147,2EBIT Margin (%) 24,4 22,8 14,8 15,7 8

ProfitabilityNet Profit (million TL) 281,1 286,4 148,7 179,8 75Earnings per Share 1,5 1,5 0,8 0,9 0,3Dividend Rate per Share (Gross) (%)

134,6 123,9 66,9 79,8 24,2

Net Financial Borrowing(million TL)

91,1 185,1 332,7 289,7 321,6

Shareholders' Equity (million TL)

1.187,2 1.215,0 1.096,9 1.093,7 1.028,9

Total Assets (million TL) 1.705,1 1.843,2 1.916,2 2.160,5 2.009,8

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Dear stakeholders,

In 2019 marked by economic uncertainties, fluctuationsinfinancialmarketsandinterestrate cuts, the eyes were on the course of trade wars between the USA and China. As a result of the settlement reached in October, the markets heaved a sigh of relief and the economy started to recover in the last months of the year.

Although Turkey had a very challenging process in2019,Turkeyhasgonethroughaverydifficultprocess with the measures taken and the policies implemented. As a result of the measures taken and the policies implemented, the economy entered into the recovery process starting from the second half of the year. With the New EconomicProgram(NEP),significantlymeetingthe market expectations, the appreciation trend in Turkish Lira has become stronger.

Considering the cement sector in particular, cement production in Turkey in 2019 has declined by 21.5 percent compared to the previous year. While the sector turned towards export again to overcome the contraction in the domestic market, approximately 19.4 percent of the cement produced was exported. According to the Turkish Cement Manufacturers’ Association data, while the domestic sales have declined by 29.4 percent in 2019 compared to the previous year, there was a 48 percent increase in cement export.

Thus, export is an important strength for Akçansa. In 2019, Akçansa produced 6.5 million tons of clinker and 5.1 million tons of cement at its three plants. The export sales increased by 111 percent compared to 2018 and reached a total of 3.6 milliontons.Thisisthehighestexportfigureforacompany in the Turkish cement sector.


Chairman’s Message

Dr.Tamer SakaSabancı HoldingPresident of Cement Group

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Akçansa increased its total turnover by approximately 6% to TRY 1 billion 826 million by focusing on export despite 30% shrinkage in the domesticcementsales.Company’snetprofitinthis period is TRY 75 million.

Displayingasignificantdevelopmentinrecentyears, Our Port activities have contributed significantlytothesuccessfulexportperformanceof our company in 2019. While our port capacity utilization rate has increased by 46 percent, we exported approximately 1 million tons of clinkerfromtheAkçansaPortAmbarlıPortforthefirsttimeinayear.Technicalinfrastructureinvestments have been made in our port to allow large ships to berth, our machinery park has been renewed and 80,000 DWT ships have been provided with the opportunity to dock at our port.

As in previous years, Akçansa focused on product development efforts for large projects in 2019. By using smart concrete technology in 1803 Concrete, which is specially produced for the 1915 Çanakkale Bridge, it is possible to instantly monitor both the temperature and strength of the concrete from the application on the phone through the sensors placed in the concrete. Taking place in one of Turkey’s iconic projects with our technology and our outstanding effort is a great pride for us.

Included in the investment plans of the entire business world in order to ensure competitive advantage, digitalization is also of great importance for Akçansa, which has plants basedonefficiency,andstandsoutamongthe investment items. Akçansa maintains its determination to reinforce its pioneering and innovative position in the cement sector with its investments in digitalization.

Within the scope of its sustainability targets for 2030, Akçansa aims to increase the use of alternative fuels and reduce carbon emissions in the production process. In line with this target, the highest alternative fuel utilization rate was 15 percentinAkçansain2019.In2019,asignificantsuccess was achieved by using 23% alternative fuel, particularly in the Samsun Ladik plant.

As a result of all these efforts, Akçansa ranked on top of the list in cement sector for the 18th time in the “Turkey’s Most Admired Companies 2019” survey. Continuously investing in people, our company’s people oriented management culture and employee related investments were rewarded with “Gold Standard” by Investors in People (IIP). In 2020, we will launch new projects together with the goal of making Akçansa’s achievements sustainable and creating value for everyone. With this belief, I would like to thank all of our valuable colleagues, shareholders, business partners, and customers for their support in the success we achieved in 2019.

Sincerely yours,

Dr. Tamer Saka


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Board of Directors

Dr. Tamer SakaChairman29.03.2018-29.03.2021

Date of Birth: 1973Undergraduate: Istanbul University, Business Administration Faculty Graduate: Doctorate Degree Istanbul University, Business Administration Faculty

Professional Experience: Saka served as Manager and Senior Manager responsible for Risk Management Consultant services in Arthur Andersen and Ernst & Young companies, and then joinedtheSabancıHoldingin2004as Risk Management Director. Tamer Saka served as Managing Director responsible for the business development activities of approximately 20 countries, including Turkey, for Willis London from 2010 to 2011. Assuming the position of Strategy and Business Development Coordinator at Kibar Holding as of December 2011, Saka continued as Head of Automotive and Corporate Functions Group and Kibar Holding Board Member as of May 2012. He acted as the CEO of Kibar Holding since 2014. Tamer Saka has been appointed as the HeadofSabancıHoldingCementGroup as of April 2, 2018.

Hayrullah Hakan GürdalVice Chairman of the Board of Directors 29.03.2018-29.03.2021

Date of Birth: 1968Undergraduate: YıldızTechnicalUniversity, Mechanical Engineering Department Graduate: Istanbul University, International Business Administration Department

Professional Experience: Gürdal has joined Çanakkale Çimento in 1992 and was appointed as Strategy and Business Development Manager in 1996 and Chief CommercialOfficerin1997inAkçansa. He was appointed as the General Manager of Akçansa as of August 1, 2008, and as the Vice Chairman of the Board of Directors as of September 1, 2014. He was assigned as a member of the Executive Committee in charge of Africa and the Mediterranean in HeidelbergCement Group on February 1, 2016.

Ahmed Cevdet AlemdarBoard Member24.01.2020-29.03.2021

Date of Birth: 1970 Undergraduate: BoğaziçiUniversity,Industrial Engineering Department Graduate: SabancıUniversityonBusiness Administration (MBA).

Professional Experience: Alemdar joinedtheSabancıHoldingin1993and served at Beksa, Sakosa, Dusa,Kordsa,andTemsaİşMakinaları,respectively.Duringthis period, he acted as the factory general manager for wire products investments towards construction and manufacturing industries in Turkeyandatoverseasaffiliatesof Kordsa in Brazil, Thailand and China towards tyre industry, and led the sales and marketing activities of the South America and AsiaPacificregions.Alemdarhasworked on R&D and innovation in technical textile and tyre as the Chief Technology and Market DevelopmentOfficerofKordsa.Alemdar acts as the General ManagerofTemsaİşMakinalarısince 2013, including the period where the company has grown with the distributorship of Volvo Truck in addition to Komatsu construction equipment, and also as the CEO of Brisa, a company established in partnership by Bridgestone and SabancıHolding,since2017.

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Mehmet Sami Independent Board Member 29.03.2018-29.03.2021

Date of Birth: 1964 Undergraduate: Kingston University, Economics DepartmentGraduate: City University Business Systems Analysis Design

Professional Experience: Sami has started his professional career in 1988. With his experience in Corporate Financing and Capital Markets during the last 30 years, SamihasopenedofficesinNewYork and Dubai and established strategic partnerships in Germany, USA and Japan since 1994, and has addressed speeches and managed panels on the Turkish economy and investment opportunities in domestic and at abroad. Mehmet Sami has carried out various privatization, merger, partnership, financialpartnership,initialpublicoffering, company valuation and consultancy projects from 1988 todate.Samihasledthefinancialpartnership projects in Turkey, and served as a member of the investment committee for seven years after being involved in the establishment process of Turkey’s biggestfinancialpartnershipfund.

Dr. Markus C. SlevogtIndependent Board Member 29.03.2018-29.03.2021

Date of Birth: 1970 Undergraduate: Philipps University, Business Administration Department, GermanyGraduate: Philipps University, Business Administration Department

Professional Experience: Slevogt completed Executive Training Program for Private Bank Executives in the NYU Stern School of Business in New York, USA, and Executive Transition Program for General Manager in the School of Management and Technology in Berlin, and received his PhD on Banking & Finance from the Philipps University. Slevogt served in various position in Deutsche Bank AG since 1998, and then he served as ING Switzerland S.A. Regional Market Manager and ING BankA.Ş.TurkeyGeneralManagerfor Primary Asset Management. As of 2012, Slevogt has served as Independent Board Member at various companies.

Dr. Carsten Sauerland Board Member06.07.2018-29.03.2021

Date of Birth: 1978Undergraduate: University of Manheim - Barcelona University, Business Administration Department Graduate: University of Mannheim

Professional Experience: Sauerland received his undergraduate degree in 2002, master’s degree in 2004, and PhD in 2007. His professional career started in Frankfurt in Tax ConsultancyandAuditfield.Heworked as Assistant Group CFO in HeidelbergCement in 2010. He acted as the Assistant General Manager (Finance) of Akçansa from 2012 to 2016. Sauerland returned back to HeidelbergCement Group in 2016, and served as Managerial and Financial Reporting Director. 2 years after his time in Akçansa, he has been appointed as a Board Member of Akçansa by representing HeidelbergCement.


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Executive Committee

Gilles CovelloAssistant General ManagerOperations Appointed on 04.03.2019

Date of Birth: 1968 Undergraduate: ENSI Clermont-Ferrand, Chemical Engineering Department

Professional Experience: Covello started his career in 1991 as Environment and Process Engineer in Ciments Français Gargenville Plant, and served as Quality and Kiln Manager in Calcia Beffes Plant from to 1996, and Production Manager in Beffes Plant, Assistant Plant Manager in Picton Plant, Production Manager in Bussac Plant, Development Manager in Bussac Plant, Production Manager in Couvrot Plant, Plant Manager in Bouin Plant, Plant Manager in Gargenville Plant, Plant Manager in Couvrot Cement Plants of Italcementi Group Calcia from 1996to2016,andfinallyTechnicalDirector in charge of 5 integrated facilities with a capacity of 11MT/y in HeidelbergCement Suez Cement Egypt from 2016 to 2019. Covello is appointed as the Assistant General Manager (Businesses) of Akçansa as of March 4, 2019.

Umut Zenar General Manager Appointed on 09.07.2018

Date of Birth: 1980 Undergraduate:BoğaziçiUniversity,International Business Administration DepartmentGraduate: BoğaziçiUniversity,Business Administration Department MBA

Professional Experience: Zenar started his career as Assistant Business Development and Planning Specialist in Zorlu Energy Group in 2003, joined our Group in 2004 and acted as Sales Specialist, Marketing andSalesPlanningOfficer,Strategyand Business Development Manager, Business Development and Marketing Manager, Chief Sales and Marketing Officer,andfinallyGeneralManagerofAkçansa, respectively, in Akçansa until December 2016. Umut Zenar served as General Coordinator in Oyak Cement Concrete Paper Group from December 2016 to June 2018.

Berrin Yılmaz Assistant General Manager Human ResourcesAppointed on 01.07.2018

Date of Birth: 1971Undergraduate: Middle East Technical University, Business Administration DepartmentGraduate: Bilkent University, MBA Program

Professional Experience: YılmazstartedhercareerinEczacıbaşıHoldingas Human Resources Specialist from 1995 to 1998, and then acted as Human Resources Manager in EczacıbaşıHoldingfrom1998to2006, Human Resources Director in Rocheİlaçfrom2006to2015,GeneralManager in Atrain GmbH from 2015 to 2017, and Human Resources Director inSabancıHoldingfrom2017to2018.

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Ümit Çetin Assistant General ManagerProcurement and Logistics Appointed on 14.10.2019

Date of Birth: 1975 Undergraduate: Bilkent UniversityDepartment of Banking and Finance

Professional Experience: Assistant General Manager (Procurement and Logistics) Ümit Çetin, graduated from Bilkent University Department of Banking and Finance in 2006. He respectively worked at Ernst & Young’da as Auditor in 2007 – 2008, at Hayat Holding as Internat Auditor in 2008 – 2009, at Olmuksa as Internal Audit Executive in 2009 – 2012 and at Çimsa as Internal Audit Manager in 2012 – 2015 and at Çimsa as Vice GM – Supply Chain since 2015. Çetin was appointed as Akçansa Assistant General Manager – Procurement and Logistics on October 14, 2019.

Steffen Schebesta Assistant General Manager Chief FinanceAppointed on 16.01.2017

Date of Birth: 1979Undergraduate: Florida University, Business Administration DepartmentGraduate: Florida University, International Business Administration Department

Professional Experience: Steffen Schebesta received his Chief FinancialAnalyst(CFA)Certificatein2011. He joined HeidelbergCement in 2006 as Financial & Competition Analyst, and then acted as Investor Relations Manager from 2010 to 2014 andfinallyasInvestorRelationsSeniorManager since 2014.

Barış Karahüseyin Assistant General Manager Sales & Marketing Appointed on 01.08.2018

Date of Birth: 1975 Undergraduate: Istanbul Technical University, Civil Engineering Department Graduate: Istanbul University, MBA Program

Professional Experience:After graduating from the Istanbul Technical University’s Civil Engineering Departmentin1996,BarışKarahüseyinhas completed the MBA program at theIstanbulUniversityin2007.BarışKarahüseyin started his professional career as Facility Supervisor at Set Beton - Italcementi Group in 1998. After assuming various positions at different groups in the sector, he acted as Strategy and Business Development Manager, Commercial Directors, Assistant General Manager - Sales & Marketing & Executive CommitteeMemberatÇimentaş-Cementir Group, respectively, from 2013to2018.BarışKarahüseyin,was appointed as Assistant General Manager - Ready-Mixed Concrete and Aggregate at Akçansa on 01.08.2018, was appointed again on 01.08.2019 as Assistant General Manager - Sales and Marketing.

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In 2019, cement production decreased by 21.5% compared to the previous year. Approximately 19.4% of the cement produced was exported. In 2019, while the domestic sales decreased by 29.4%, cement exports increased by 48%.

According to TUIK data, during the period of January-December 2019, the country with highest increase in cement and clinker export was Ivory Coast, while exports were made to countries such as the United States, Ghana, Israel, Guinea, Syria and Colombia.

While the number of building licenses granted by the municipalities in 2019 decreased by

48.3% compared to the previous year, the surface area decreased by 52.4%, the value decreased by 43.8%, and the number of apartments decreased by 53.9%. Compared to the previous year, the number of occupancy permits granted by the municipalities decreased by 26.6%, while the surface area decreased by 14.5%, the number of apartments decreased by 17.8%, and the value increased by 0.2%. Housing sales decreased by 1.9% in 2019 compared to the previous year and resulted as 1.348.729 units.

Cement Production and Consumption in Turkey (million metric tons)*

Cement and Clinker Export of Turkey (million metric tons)*

Production Domestic Consumption

2015 71,4 63,7

2016 75,4 66,8

2017 80,6 72,2

2018 73,4 65,2

2019 57,0 45.4

Cement Clinker Total

2015 7,4 3,1 10,5

2016 7,5 3,7 11,2

2017 8,0 4,9 12,9

2018 7,1 5,8 12,9

2019 11.4 11.7 23,0

* Including data from the Turkish Cement Manufacturers’ Association (TCMA) member manufacturers.

* Including data from the Turkish Cement Manufacturers’ Association (TCMA) member manufacturers.


Sector Information

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Sales

Akçansa’s total domestic sales of cement and clinker in 2019 decreased by 36% compared to 2018, and realized as 3.5 million metric tons. The total sales in export increased by 111% compared to 2018, and realized as 3.6 million metric tons.

Domestic Sales (million metric tons) Cement Clinker Total

Exports (million metric tons)

Total Sales (million metric tons)

2016 2017 2018 2019

6,6

5,5

3,6

0,0

0,0

0,0

6,6

5,5

3,6

6,4

0,0

6,4

2016 2017 2018 2019

1,0

1,1

1,6

0,4

0,6

2,0

1,4

1,7

3,6 1,1

0,4 1,5

2016

7,5

0,4

7,9

2017 2018 2019

7,6

6,5

5,2

0,4

0,6 2,

0

8,0

7,2

7,2

Successfully maintaining the Akçansa Ready-Mixed Concrete activities in the Marmara, Aegean and Black Sea Regions, Betonsa has realized total 2.1 million m3 sales at its 28 facilities as of the end of 2019.

Continued at four individual plants in Kemerburgaz, Saray, Bursa and Samsun, the aggregate sales under Agregasa brand were realized at 1.5 million metric tons in 2019.

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Total output of Akçansa’s Büyükçekmece, Çanakkale, and Ladik plants weighed in at 6.5 million metric tons of clinker and 5.1 million metric tons of cement in 2019. This corresponded to 11.3% and 9% respectively of Turkey’s total clinker and cement production last year. The production operations in all facilities of Akçansa were carried out in line with OHSAS 18001 Occupational Health and Safety Management System, BS EN ISO 9001:2000 Quality Management System, and BS EN ISO 14001 Environmental Management Systemcertifications.Thecompanyalsosuccessfullypassed its British Standards Group audits and its BSI certificationshavebeenrenewed.

More than 500 thousand metric tons of waste was recycled in all the plants of Akçansa. Akçansa Büyükçekmece plant is positioned as a solution partner to Istanbul’s waste problem. 70 thousand tons of dried treatment sludge from

ISKI’s treatment plants in Istanbul are used as fuel in Akçansa Büyükçekmece plant, thus energy recovery is provided.

AlltheplantsofAkçansahaveacertificateofconstancy of performance from the Council for Quality andEnvironment,TSEcompliancecertificatefromtheTurkishStandardsInstitution,GostCertificatefromRussia,andqualitystandardcertificatefromtheStandards Institutions of Israel.

Akçansa’s ready-mixed concrete plants produce both normal and high-strength concrete conforming to the TS EN 206 and TS 13515 standards. Products are available in a variety of consistency and aggregate size classes in the C 8/10 to C 100/115 range.

Production

Production(million metric tons)

Cement Clinker

2015 2016 2017 2018 2019

Capacity Utilization Rate %

6,8

7,4

7,9

6,5

5,1

76 81 81 71

55

6,8

6,9

6,9

6,6

6,5

97 98 99 93 92

2015 2016 2017 2018 2019

Cement Clinker

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Occupational Health and Safety

Akçansa plans and implements all the technological and physical investments in line with digital developments in order to create and maintain a healthy and safe working environment in accordance with the national and international legal legislation and regulations.

With the “Occupational Health and Safety Workshop”, whichwasorganizedforthefirsttimethisyearwiththe participation of Akçansa’s senior management, efforts to be taken for the more effective spreading of occupational safety culture to the subcontractors are planned.

Occupational health and safety efforts organized in line with the HeidelbergCement Group continue. In this context, various organizations, trainings and senior managementfieldvisitstoincreasetheawarenessand perception of employees within the framework of the “Akçansa Occupational Health and Safety Week” were held in all locations of Akçansa for a week in September.

While carrying out efforts in line with the targets of Akçansa, an objective and independent external audit was held also this year within the scope of OHSAS 18001 Occupational Health and Safety management system by BSI and TÜV Rheinland, and it has been certifiedthatallthelocationsmeettherequirementsofmanagement system.

With the participation of its executives to the “NEBOSH International Occupational Health and SafetyCertificateTraining”,whichisrecognizedinternationally, Akçansa once again demonstrated the importance it attaches to occupational health and safety training and development of not only its employees, but also its executives.

In the determined journey to “Zero Accident” target, “Open Road Project” related to Driving Safety, one of “Ten Golden Rules of Akçansa”, was launched in order to ensure the sustainability of the Occupational Health and Safety culture getting stronger day by day. Within the scope of the project, defensive driving trainings were given to the drivers of heavy vehicles and passenger cars working in all ready-mixed concrete facilities, logistics and plants at the Akçansa Driving Academy in 2019.

Occupational Health and Safety Performance Indicators 2019

26.63144.88928.7392.5644.7 88.1

Occupational Health and Safety Training (man/hour)

Safety Interviews

HazardNotifications

Field Audits

Accident Frequency

Accident Severity

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A total of 1426 concrete tests were performed at the Akçansa Technology Center Laboratory during 2019 for the purposes of R&D projects, raw material performance at concrete phase, optimization, and specialty product.As in previous years, Akçansa focused on product development efforts for large scale projects in 2019. Support was provided to the design of special products, particularly for the 1915 Çanakkale Bridge project. R&D projects and academic works in cooperation with universities and public institutions continued.

Ongoing R&D Projects:

• Use of Activated Natural Minerals as a Substitute to Cement (in cooperation with the SabancıUniversity)• Nuclear Shielding Performance Concrete Project (in cooperation with the Turkish Atomic

Energy Authority)• Tracking of Quality Control Parameters in Cement Production with Advanced Data Analytics• Investigation of Using Alternative Mineral Additives in Cement and Concrete Production• Performance Analysis of Cement Grinding Additives

During the technical trips attended by various high schools and universities throughout the year, presentations on cement and concrete technology were made and the cement and ready-mixed concrete sectors were introduced to the students.

R&D Activities

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Akçansa Çanakkale Fine Arts High School is opened

Acting upon its part of responsibility to ensure that the youth gets a good education and has a better future, Akçansa launched “Akçansa Fine Arts High School’ in cooperation with the Çanakkale Governorship and the Ministry of National Education.

Fine Arts High School is designed as education center with 31 classrooms in total including design classroom, recording and broadcasting room, and tonmeister room. The high school establishedforpreparingthestudentstothefineart faculties and conservatories according to their interest, request and talents is consisted of modern classrooms, conference and performance hall.

Concrete Ideas Project Competition is in its 10th year!

The award ceremony for the Concrete Ideas Project Competition, held with the motto “We Need A Digital Idea There”(ŞurayaBi’DijitalFikirLazım)thisyear,washeldattheSabancıSakıpSabancıMuseumTheSeedEmirgan.

More than 10 thousand students from different universities in Turkey applied to the Concrete Ideas Project Competition to date. At the 10th Concrete Ideas Project Competition, Istanbul TechnicalUniversityrankedfirst,whileKarabükUniversity and Istanbul Technical University sharedthesecondplace.ÖzyeğinUniversityranked third in the competition.

Social Responsibility

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“My Profession, Your Choice” project sheds a light on the future of young people from Çanakkale

Akçansa’s “My Neighborhood Project” met with high school students after elementary and secondaryschoolchildren.Withtheprojectfirststarted in Istanbul and continued for three years, more than 30 thousand students, teachers and parents received a training. In 2019, 10 schools in Çanakkale were visited and 800 students were reached with “My Profession, Your Choice” project launched in cooperation with Çanakkale Provincial Directorate of National Education and TOÇEV.

Group works were held within the scope of “My Profession, Your Choice” project where the students will get an insight related to them and learn about the professions. Within the scope of the program, 10th and 11th grade students had the opportunity to explore their talents through imaging study and a box game aiming to improve their self-perception aiming to increase attention and concentration skills.

While TOÇEV’s specialist psychologists applied professional orientation tests to young people, Akçansa employees voluntarily shared their professional experiences with young people.

Akçansa Volunteers painted the Samsun Ladik Atatürk Elementary School

Akçansa Volunteers painted the classrooms of the Ladik Atatürk Elementary School before the new academic year in cooperation with the Ladik District Governorship and the Ladik District National Education Directorate. The students started the new academic year in their renewed school colored by more than 30 Akçansa Volunteers working at the Akçansa Ladik Plant.

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Akçansa Volunteers attended the “Workshop on Making Walkers and Prostheses for Disabled Animals”

Akçansa Volunteers attended the workshop on making walkers at the Büyükçekmece Akçansa Mehmet Akif Ersoy Elementary School on April 23Children’sDaytogetherwithHasanKızıl,whoiselectedasa“DifferenceMaker”bytheSabancıFoundation and making walkers and prostheses for disabled animals.

“Cement Day” is organized with the participation of Akçansa’s business partners

Represented by Akçansa and Çimsa in the cement sector,theSabancıHoldinghasorganizedthe“CementDay”meetingforthefirsttimethisyearto share with the business partners its vision and missioninthecementsector.SabancıHoldingChairmanGülerSabancı,SabancıHoldingCEOCenkAlperandSabancıHoldingCementGroupPresident Dr. Tamer Saka and 400 business partners have attended to the meeting.

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Akçansa’s Human Resources Strategy


Akçansa acts with the HR vision of “being the most preferred employer by creating a unique work culture where the employees feel themselves valuable and learn continuously”.

The philosophy “Each executive is an HR executive” is used in all HR processes and systems carried out in line with people oriented, leadership development, talent management, continuous development and flexible human resources strategies.

InvestorsInPeople-IIPGoldcertificatereceivedin2019showstheefficiencyofeffortsconductedinline with this mission.

In accordance with the strategic human resources management approach, HR strategy and short/mid term targets are reviewed and integrated to the targets of all functions.

Accordingly, strategic priorities for 2019 were established as:

• Making a difference in employee experience• Strengthening the leadership development• Experiencing and learning continuously• Creating a flexible work culture open to innovation and based on data• Making it possible for the company to recruit and hold onto talented people.

• Creating human resources strategic priorities.

Human First

Employee participation is encouraged at Akçansa through informational and motivational gatherings (“Communication” and “We’re Listening To You” meetings) which are attended by all employees and at which knowledge, ideas, and suggestions are exchanged. With the “HR On-Site” visits, the plants and facilities of Akçansa in all regions are visited, and the actions to be taken are determined, monitored and implemented by holding one-to-one meetings with Akçansa employees.

Employees’ satisfaction and loyalty is measured through a regularly conducted “Work Life Evaluation Poll” in order to determine issues that may be in need of correction. Made up of voluntary representatives from different company functions and locations, the “Employee Ambassadors Council” endeavors for making uninterrupted two-way communication with employees permanent, creating a strong, trusted and clear channel, and turning this into a lifestyle. yürütmektedir.

Based on the work = life balance, sports, cultural and social events as well as “Family Workshops” diversifiedinlinewiththerequestsandexpectationsof all employees are carried out in Akçansa under “Happiness Workshop” in cooperation with the Akçansa Clubs World. Clubs founded by the volunteered Akçansa employees organize activities in line with the requests of Akçansa employees.

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IIP “Gold Standard” for Akçansa’s HR Management

As the only human-focused quality standard in the world focusing on all processes and practices for the development and management of human resources, the IIP process was completed after thefieldinspectionsofnationalandinternationalevaluators and the interviews with all employee groups.AkçansaisthefirstcompanyinTurkeytoachieve a Gold accreditation in IIP 6th Generation.

The IIP process was completed successfully as a result of the comparisons with 685 industrial companies in 75 countries following the process andfieldinspectionsbynationalandinternationalevaluators and the interviews with all employee groups, and Akçansa received the Gold Standard. This result obtained as a company continuously investing in its employees showed that the real success can be achieved with believing and trusting teams.

Equality at Work

Providing employees with a positive workplace environment and conditions as they deserve, supporting gender equality in working life, increasing communication and synergies among employees and thereby strengthening its corporate culture by acknowledging the value of diversity are among the top priorities of Akçansa. Declaration of Equality at Work and the Global Compact / WEPS “Women

Empowerment Principles” were signed in this context in 2013 and 2014.

Collaborations with various project partners focusing on women such as “Mom, Bring Me Milk” project launched in this context, as well as “Ladik Glass Workshop” and “We Again” giving an opportunity to turn the labor of housewives of Ladik into economic value by contributing to their production activities still continue.

As one of 20 companies participating to the Domestic Violence Survey held within the scope of the Business Against Domestic Violence (BADV) projectlaunchedbytheSabancıUniversitywiththe support of UNFPA in 2013, Akçansa received BADV training of trainer in 2018 and has been the firstcompanypublishing“SocialGenderEqualityinAkçansa”policyintheSabancıGroup.

The policy establishes support mechanisms, as well as promises 30% women in the management of Akçansa. Following the search conference held related to turn BADV into a sustainable structure by the member companies, Akçansa has become one of 12 companies in the Founders’ Committee.

Heldforfieldandofficeemployeesatthreemainlocations (Istanbul, Çanakkale and Samsun) since 2018 and attended by approximately 200 Akçansa employees to date, the “Social Gender Equality” workshops still continue.

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“Worth Favor & From Us To Our Children” Talent and Success Scholarship

Akçansa supports talented and successful children of Akçansa employees and provides education scholarship to them in cooperation with the Akçansa employees so that these children can start their dreams one step ahead.

The successful and talented children of Akçansa employees selected according to the criteria determined by TOÇEV are provided with a TRY 6,000 scholarship per scholarship student for the academic year of 2019/2020. The success scholarship in the project covers 12th grade students, while the talent scholarship covers all educational levels from primary school to university. Scholarship students will continue to be supported until they graduate from university as long as they meet the success criteria.

With a system where the volunteered Akçansa employees can support the scholarship pool with theirfinancialcontributions,wetouchthelivesofthechildren who worth a favor.

Talent and Continuous DevelopmentTalent Acquisition

As the sector’s leader and most admired company, Akçansa, in line with its HR strategy, aims to enhance its strength by getting to know and creating strong bonds with potential employees who love their work and who want to be a part of Akçansa.

When recruiting and hiring people, the company

makes no inquiries whatsoever concerning such issues as religion, language, race, creed, gender, physical condition, or life choices and engages in no practice whatsoever that might be perceived as being discriminatory.

In line with its “Choose the right person for the right job” principle, Akçansa decides whether jobapplicantsarequalifiedornotasaresultofa process that involves multiple observations and objective criteria that include value based interviewing, personality inventorying, and foreign language competency testing.

The importance attached to growth and development with young talents is reinforced with “Let’s Shape The Future Together” recruitment and rotation program launched in 2018. It is aimed that the new recruits learn about the operation and structure of all departments of Akçansa for six months within the scope of the program. “Let’s Shape the Future Together” youth recruitment program continues to back up the positions needed within the scope of Akçansa’s regularly reviewed talent pool.

With the priority attached to the development of youth,AkçansacontinuesitscooperationwithİTÜChemical Engineering for six years.

In addition to the individual and general orientation programs for quickly adapting them to the processes and corporate culture, the new recruits arealsosupportedwithfieldvisits,Buddypractice,orientation module, and “Akçansa Universe” specially designed with virtual reality technology launchedin2018asafirstinthesector.

ÇOCUKLARIMIZ İçİnbİzden bİze

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Performance Culture

The Akçansa Performance Management System provides important input for HR processes. This system encompasses the entire process of translating and integrating company goals into individual and team goals and of effectively and continuously addressing and managing individual competencies.

The Akçansa performance management process is a cyclical process that begins at the start of each new year when employees and their supervisors sit down together to identify the year’s individual and corporate objectives and continues for the rest of theyearwithtarget-fulfillmentmeetings.

Training & DevelopmentAs embodied in its “My Development Is Primarily My Responsibility” maxim, whose aims are to foster the corporate culture the company wants, to realize business goals and strategies, and to reveal employees’ potential, Akçansa provides its employees with the development tools for experience based learning, projects, talent activity, competencyandtechnicalfieldstoachievethatdevelopment. Besides the in-house training that is provided, Akçansa employees may also take advantage of a variety of extramural training opportunities provided by Akçansa’s business partners(HeidelbergCement,SabancıHolding,SabancıUniversity,ÇEİS).WithinthescopeoftheIndustry Leaders development program, launched forSabancıHoldingIndustryandCementGroupcompaniesincooperationwithSabancıUniversityEDU, technology and business models are taken into considerationandthefieldengineersandmanagersare empowered on team and process management.

In 2019, total 28.529 hours of training were provided in Akçansa and the average training time per person was realized as 28.6 hours.

Leadership Development

While managing the business and teams with coaching, visionary and democratic leadership approaches, it is the utmost priority of the executives to focus on the development of Akçansa Family with shared vision, mission and values, building up trust, and ensuring a positive work environment with a transparent and continuous communication.

The goal of the Leadership Meetings, Leadership Style Survey, Organizational Climate Survey and Leadership Development Program conducted every year in Akçansa is to support the continuous improvement of executives’ leadership skills.

Akçansa’s Feedback & Coaching approach is an important part of its HR management. To ensure the effectiveness of this approach, employees are supported by means of continuous development programs.CareerPlaneTree(KariyerÇınarı)(Akçansa Internal Mentorship Program with EMCC accreditation), A New Leader Program (Yeni Bir LiderProgramı)developedincooperationwiththeBoğaziçiUniversity,HighLevelLeadershipDevelopmentProgram(ÜstDüzeyLiderlikGelişimProgramı)heldincooperationwithÇEİSandtheKoç University, Leadership Development Program (LiderlikGelişimProgramı)heldincooperationwithÇEİSandtheSabancıUniversity,X-PosureandT-PEXdevelopmentprogramsheldwiththeSabancıHoldingforbothseniormanagementandfuture leaders are supported with development & assessment center and 360-degree applications.

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Flexible Human Resources

The aim is improving the digital human resources practices which strengthen the cooperation between departments and employees in line with the digital transformationstrategyofAkçansa.MozaİKHRPortal, which is used for increasing the effectiveness andefficiencyofperformance,developmentandlearning process and improving the integration with other HR practices, offers a platform responding to the different expectations of the employees with its user-friendly interface allowing users to access at anyplaceindependentlyfromtheoffice.

“Külçe Külçe Project Competition” and “Continuous Improvement Projects - CIPs” are organized in order to provide our employees the opportunity to put their innovative ideas at the best level and to enrich their experiences by developing a cooperation. Akçansa employees graduating as a Data Scientist and Data EngineerfromtheSabancıAdvancedDataAnalyticsAcademy lead the digitalization projects of the company.

Aiming to offer a unique working culture to its employees, Akçansa launched “Flexible Actions” in 2019. Within the scope of the Flexible Working Culture, the headquarters was renewed to support and encourage cooperation, while the relevant strategy is reinforced with 2-day remote work in a month, flexible working hours, birthday leave and flexible clothing practices.

Commendation and Recognition

Akçansa employees receive a basic salary within the scope of the remuneration policy, in line with levels of responsibility and scope of duty. Owing both to individual performance-based bonuses and to seniority-based pay supplements, the total amounts in the pay packets of employees at the same salary grade may differ from one another. However the company’s remuneration policy stipulates that no employee may be treated differently because of their gender or any other personal attribute. In order to keep its remuneration policy and practices competitive, Akçansa has comparison studies performed among those of companies comparable to itself using internationally-accepted assessment methodologies. The fundamental tenets of the company’s remuneration policy are to be fair, competitive, and compatible with generally-prevailing wage levels in Turkey while also rewarding superior performance.

Employees’fringebenefitsarealsomanagedflexibly with Bflex so as to maximize effectiveness in line with requirements. A variety of appreciation and recognition methods are employed and such as “An evening with Akçansa”, “Special Reward for Performance”, “Executive Committee Special Appreciation Awards”, “OHS Leaders of the Year Awards” and “Seniority Plaques” in order to reward high-performing employees and teams.

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Industrial Relations

Akçansa regards the right to organize as a fundamental one. Company employees are at liberty to join labor and trade unions and to exercise and enjoy their membership rights. All blue-collar employees employed in Akçansa cement plants are union members. In this context, a collective bargaining agreement between the Cement, Ceramics,ClayProducts,andGlassIndustryWorkers’Union(Çimseİş)andtheCementIndustryEmployers’Association(ÇEİS)coveringtheperiodJanuary1,2020toDecember31,2021remainsineffect.(Willvaryaccording to the signing date)

Demographics of Akçansa Employees

Company in General

Company in General

Generation Y Blue Collar

Blue Collar

Generation X White Collar

White Collar

Baby Boomer

38

%38,6

38%61,2 39

%0,2

10.710.4 10.1

Average Age Distribution Average Seniority Distribution (year)

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Annual Activity Report For the Period of January 01 – December 31, 2019

Contents

Independent Auditor Opinion Activity Report

Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi Annual Report for the Accounting Period of January 1, 2019 - December 31, 2019

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INDEPENDENT AUDITOR’S REPORT CONCERNING ANNUAL REPORT OF THE BOARD OF DIRECTORS To the General Assembly of Akçansa Çimento Sanayi ve Ticaret A.Ş.

1) Opinion We have audited the annual report of Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi (“Company”) and its subsidiaries (“Group”) for the accounting period of 1 January 2019 – 31 December 2019. In our opinion, the consolidated financial information included in the annual report of the Board of Directors and the examinations made by the Board of Directors about the Group status are consistent with the full set of consolidated financial statements audited in all important aspects and the information we obtained during the independent audit and reflect the truth.

2) Basis of Opinion We conducted our audit in accordance with standards on auditing as issued by the Capital Markets Board of Turkey and Independent Auditing Standards (InAS) which are part of the Turkish Auditing Standards as issued by the Public Oversight Accounting and Auditing Standards Authority of Turkey (POA). Our responsibilities under those standards are further described in the Independent Auditor’s Responsibilities for the Independent Audit of the Annual Report section of our report. We declare that we are independent of the Group in accordance with the Code of Ethics for Independent Auditors (Code of Ethics) as issued by the POA, and the ethical provisions in the legislation on independent audit. We have fulfilled our other ethical responsibilities in accordance with the Code of Ethics and the legislation. We believe that the independent audit evidences we have obtained during the independent audit are sufficient and appropriate to provide a basis for our opinion.

3) Our auditor's opinion on the full set of consolidated financial statements In our auditor's report dated 20 February 2020, we have provided a positive opinion on the full set of consolidated statements of the Group for the accounting period of 1 January 2019 - 31 December 2019.

4) Responsibility of the board of directors regarding the annual report The Group management of the Company is responsible for the following points related to the annual report according to the Article 514 and Article 516 of Turkish Commercial Code numbered 6102 and Communique of Capital Market Board numbered II-14.1 regarding the principles concerning financial reporting in the capital market. a) It prepares the annual activity report in the first three months following the balance sheet day and presents it to

the general assembly

b) It prepares the annual activity report in a way that reflects the Group's activity flow for that year and its financial situation in a complete, accurate, straightforward, fair and honest manner. In this report, the financial situation is evaluated according to the consolidated financial statements. The report also clearly points to the development of the Group and the potential risks that it may encounter. The evaluation of the board of directors on these issues is also included in the report.


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c) The annual report also includes the following matters. - Events having special importance that were occurred in the Group after the end of the activity year - Research and development activities of the Group - Financial benefits such as salaries, premiums, bonuses, allowances, travel, accommodation and representation expenses, in-kind and in-cash facilities, insurances and similar indemnifications paid to board members and senior executives While preparing the annual report, the Board of Directors also takes into account the secondary regulations made by the Ministry of Customs and Trade and related institutions.

5) Responsibiblity of Independent Auditor Concerning Independent Audit od the Annual Report Our purpose is to give an opinion about whether the consolidated financial information in the annual report and the examinations made by the board of directors are consistent with the consolidated financial statements of the Group, which have been audited, and the information that we obtained during the independent audit and whether they reflect the truth, and to prepare a report containing our said opinion. The independent audit we conducted was carried out in accordance with the Independent Auditing Standards and the Independent Audit Standards published by the Capital Market Board. These standards requires the compliance with ethical provisions and the planning and execution of the independent audit to obtain reasonable assurance regarding whether the consolidated financial information in the annual report and the examinations made by the board of directors are consistent with the consolidated financial statement and the information obtained during the audit and whether they reflect the truth. The responsible auditor who conducts and finalizes this independent audit is Cem Uçarlar. Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited

- seal and signature –

Cem Uçanlar, Independent Accountant and Financial Advisor Responsible Auditor 20 February 2020 İstanbul, Turkey


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A) General information

Corporate Name: Akçansa Çimento Sanayi ve Ticaret A.Ş. Company’s Head Office: Barbaros Mahallesi Kardelen Sokak No:2 D.124-125

Palladium Tower Ataşehir /Istanbul Telephone-Fax Number of Head Office of the Company: 0(216) 571 30 00 – 0(216) 571 30 31 Trade Registry Number of the Company: İstanbul Trade Registry Office, 129269 Central Registration System (Mersis) No: 0229-0003-9470-0017 Company Website: www.akcansa.com.tr

Capital: The Company is subject to the registered capital system, and the upper limit of the registered capital is 500.000.000 -TL, its paid capital is 191.447.068,25 -TL.

Report Period: January 01, 2019 – December 31, 2019

The Industry in Which Company Operates:

Akçansa Çimento Sanayi ve Ticaret A.Ş. (hereafter referred to as “Akçansa” or “Company”) and its subsidiary are engaged in manufacturing of cement, clinker, ready mixed concrete and aggregate. Shareholding Structure

SHARE AMOUNT TL

SHARE RATE %

SHARE NUMBER (UNIT)

HEIDELBERGCEMENT AG. 76.035.135,41 39,72 7.603.513.541

HACI ÖMER SABANCI HOLDİNG A.Ş. 76.035.136,43 39,72 7.603.513.643

ABDULKADİR KONUKOĞLU 10.000.000,00 5,22 1.000.000.000 PUBLICLY AVAILABLE PART 29.376.796,41 15,35 2.937.679.641 GRAND TOTAL 191.447.068,25 100,00 19.144.706.825

Information on Privileged Shares

Our Company has no privileged shares. Board of Directors: Tamer Saka, CEO 29.03.2018-29.03.2021 Hayrullah Hakan Gürdal, Vice Chairman 29.03.2018-29.03.2021 Serra Sabancı, Board Member 29.03.2018-31.03.2019 Burak Turgut Orhun, Member 01.04.2019-24.01.2020 Ahmed Cevdet Alemdar, Board Member 24.01.2020-29.03.2021

(To be presented to the approval of the First General Assembly)

Dr. Carsten Sauerland, Board Member 06.07.2018-29.03.2021 Mehmet Sami, Independent Board Member 29.03.2018-29.03.2021 Dr. Markus C. Slevogt, Independent Board Member 29.03.2018-29.03.2021 Chairman and Members of the Board of Directors have been authorized by General Assembly of the Company to perform the written procedures stated in Articles 395 and 396 of the Turkish Commercial Code (TCC).


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Authorities and Responsibilities of the Board of Directors and Executives

The Articles of Association describes the Company’s Board of Directors’ rights to govern and represent. The authorities and responsibilities of the executives are not explained in the Articles of Association of the Company. However, the said authorities and responsibilities are described by the Board of Directors of the Company. Operating Principles of the Board of Directors During the period of January 1 2019 - December 31, 2019, the Board of Directors of the Company met 105 times, of which 4 were conducted face-to face, with written approval pursuant to the Turkish Commercial Code and the provisions of the Articles of Association. The Board of Directors’ agenda is determined as a result of the meetings held between the Chairman of the Board of Directors and the current Board Members and the General Manager. The agenda and the contents of the agenda items are compiled in a file by the preliminary informative committee and circulated to Board Members one week prior to the relevant meeting to allow time for necessary review and study. During the meetings that were held between January 1, 2019 and December 31, 2019, there were no opposing views against the resolutions taken by the Board of Directors. Board Members, save for those with a justifiable excuse, personally attended the board meetings. No questions were recorded in the minutes because no questions were posed by the Board Members. Board Members have not been granted weighted voting rights and/or veto rights on related decisions. The Number, Structure and Independence of the Committees Established at the Board of Directors As of the period of January 1, 2019 - December 31, 2019, an Audit Committee is in place reporting to the Board of Directors. Following the Ordinary General Assembly Meeting held on March 29, 2018, Independent Board Members Mehmet Sami and Dr. Markus C. Slevogt were appointed as the Chairman and the Member of the Audit Committee respectively. Pursuant to the CMB Communiqués, it was resolved to establish a Corporate Governance Committee and to appoint Independent Board Members Mehmet Sami and Dr. Markus C. Slevogt and the Financial Affairs Director Hüsnü Dabak (resigned on 05.09.2018, replaced by Dinçer Bulan on 05.09.2018) as the Chairman and the Members of the Committee

respectively in accordance with the communiqué provisions. It was resolved to have this committee carry out the duties of the Nomination Committee and the Remuneration Committee as well. An Early Detection of Risk Committee was established, and Dr. Markus C. Slevogt and Mehmet Sami were appointed as the Chairman and the Member of the Early Detection of Risk Committee respectively. The Audit Committee, Corporate Governance Committee and Early Detection of Risk Committee perform their duties according to the internal regulations. There were no conflicts of interest in the Audit Committee during period of January 1, 2019 - December 31, 2019 due to current member structures. The Audit Committee convenes at least four times a year with at least three-month intervals; it records the meeting minutes and submits them to the Board of Directors. The Corporate Governance Committee convenes at least four times a year with at least three-month intervals; it records the meeting minutes and submits them to the Board of Directors. Early Detection of Risk Committee convenes at least six times a year with two-month intervals. The reports containing information and results about the committee’s work are approved, and then submitted to the Board of Directors. The current operation principles of the committees are available on the corporate website. Prior to Board of Directors’ meetings, the Pre-notification Committee prepares detailed presentations, performing the necessary in depth studies regarding the matters that will be submitted for the approval of the Board of Directors. Internal Audit Manager submits Corporate Governance Principles related reports to the Audit Committee Members.


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Committees Audit Committee Mehmet Sami, Chairman Dr. Markus C. Slevogt, Member Corporate Governance Committee Mehmet Sami, Chairman Dr. Markus C. Slevogt, Member Dinçer Bulan, Member Early Detection of Risk Committee Dr. Markus C. Slevogt, Chairman Mehmet Sami, Member Auditor Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Changes in the executive team within the year, and names, last names and professional experience of the officers currently serving Umut ZENAR General Manager Umut Zenar received his Bachelor’s Degree from the International Relations Department of the Boğaziçi University in 2003 and completed his Executive MBA program in the Boğaziçi University in 2010. Zenar started his career as Assistant Business Development and Planning Specialist in Zorlu Energy Group in 2003, joined our Group in 2004 and acted as Sales Specialist, Marketing and Sales Planning Officer, Strategy and Business Development Manager, Business Development and Marketing Manager, Chief Sales and Marketing Officer, and finally General Manager of Akçansa, respectively, in Akçansa until December 2016. Umut Zenar served as General Coordinator in Oyak Cement Concrete Paper Group from December 2016 to June 2018. Appointed on 09.07.2018. Ali KİPRİ Assistant General Manager - Businesses / Resigned on 28.02.2019. Born in Adana in 1967, Ali Kipri graduated from Middle East Technical University Department of Mechanical Engineering. He received his master’s degree from İstanbul University Institute of Business Economy on International Business Administration. He began his professional career in 1993 at Akçimento, serving in various positions until being appointed Plant Maintenance Manager in 2006 at Akçansa’s Büyükçekmece plant. Acting as the Büyükçekmece Production Manager and Büyükçekmece Plant Assistant Manager, Ali Kipri was appointed as the Ladik Plant Manager on September 15, 2009. Kipri acted as the

Çanakkale Plant Manager starting from June 15, 2012. He is appointed as the Assistant General Manager (Businesses) on July 1, 2014. He has been resigned as of 28.02.2019. Gilles COVELLO Assistant General Manager - Businesses / Appointed as on 04.03.2019. Gilles Covello graduated from ENSI Clermont-Ferrand Chemical Engineering in 1991. Covello started his career in 1991 as Environment and Process Engineer in Ciments Français Gargenville Plant, and served as Quality and Kiln Manager in Calcia Befes Plant from 1993 to 1996, and Production Manager in Befes Plant, Assistant Plant Manager in Picton Plant, Production Manager in Bussac Plant, Development Manager in Bussac Plant, Production Manager in Couvrot Plant, Plant Manager in Bouin Plant, Plant Manager in Gargenville Plant, Plant Manager in Couvrot Cement Plants of Italcementi Group Calcia from 1996 to 2016, and finally Technical Director in charge of 5 integrated facilities with a capacity of 11MT/y in HeidelbergCement Suez Cement Egypt from 2016 to 2019. Covello is appointed as the Assistant General Manager (Operations) of Akçansa as of March 4, 2019. He has been appointed on 04.03.2019. Steffen SCHEBESTA Assistant General Manager - Finance Born in Germany in 1979, Steffen Schebesta graduated from Florida University Department of Business Administration in 2004, and received his master’s degree on International Business Administration from the same university in 2005. Steffen Schebesta received his Chief Financial Analyst (CFA) Certificate in 2011. He joined HeidelbergCement in 2006 as Financial & Competition Analyst, and then acted as Investor Relations Manager from 2010 to 2014 and finally as Investor Relations Senior Manager since 2014. During this process, the significantly strengthened the relations with main investors and analysts. Barış KARAHÜSEYİN Assistant General Manager (Ready-Mixed Concrete and Aggregate) Appointed as Assistant General Manager - (Sales and Marketing) on 01.08.2019. After graduating from the Istanbul Technical University’s Civil Engineering Department in 1996, Barış Karahüseyin has completed his MBA program at the Istanbul University in 2007. Karahüseyin started his career in 1998 as Facility Supervisor in Set Beton-Italcementi Group, and served as Regional Manager in Soyak Group-


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Tarçim from 2009 to 2010, Assistant General Manager in Boğaziçi Beton from 2010 to 2013, Strategy and Business Development Manager in Çimentaş from 2013 to 2015, Commercial Director in Çimentaş from 2015 to 2017, and Assistant General Manager (Sales & Marketing) and Executive Committee Member in Çimentaş from 2017 to 2018. Barış Karahüseyin, who has been appointed with the title of Assistant General Manager - Ready-Mixed Concrete and Aggregate on 01.08.2018, Changes in the executive team within the year, and names, last names and professional experience of the officers currently serving (continued) was appointed as Assistant General Manager - Sales & Marketing on 1.8.2019. Berrin YILMAZ Assistant General Manager (Human Resources) Born in Ankara in 1971, Berrin Yılmaz graduated from the Middle East Technical University Business Administration Department in 1993. Yılmaz completed her MBA Master’s Degree program in the Bilkent University in 1995. Yılmaz started her career in Eczacıbaşı Baxter as Human Resources Specialist in 1995, and then acted as Human Resources Manager in Eczacıbaşı Baxter from 1998 to 2006, Human Resources Director in Roche İlaç from 2006 to 2015, General Manager in Atrain GmbH from 2015 to 2017, and Human Resources Director in Sabancı Holding from 2017 to 2018. She is appointed as the Chief Human Resources Officer as of 01.07.2018. Onur YAZGAN Assistant General Manager - Cement Sales and Marketing / Resigned on 01.08.2019. After graduating from the Galatasaray University’s Industrial Engineering Department in 2005, Onur Yazgan has completed the MBA program at the Boğaziçi University in 2010. Onur Yazgan started his career in 2006 as Export Regional Sales Manager in Unika Universal Kablo, and acted as Marketing Officer, Strategic Marketing & Process Development Director, Marketing & Sales Development Manager and Cement Sales Regional Manager - Northern Marmara in Akçansa from 2010 to 2016. Yazgan worked as Marketing & Specialty Products Director in Oyak Cement Group from 02.02.2017 to 14.09.2018. He was resigned on 01.08.2019.

Ümit ÇETİN Assistant General Manager - Purchasing and Logistics / Appointed as on 14.10.2019. Ümit Çetin graduated from Bilkent University, Department of Banking and Finance in 2006. He worked as an Auditor in Ernst & Young in 2007 and 2008, as Internal Auditor in Hayat Holding in 2008 and 2009, as Internal Audit Executive in Olmuksa between 2009 and 2012, as Internal Audit Manager in Çimsa between 2012 and 2015, and since 2015, he has been working as Assistant General Manager - Supply Chain in Çimsa. He was assigned as Assistant General Manager - Purchasing and Logistics on 14.10.2019. Mustafa TURAN Plant Manager - Büyükçekmece Plant / Appointed as of 01.11.2018. After graduating from Istanbul Technical University Mechanical Engineering Department in 1985, Mustafa Turan received his postgraduate degree from the department of the same university in 1985. He started his career in 1989 as Cement Production Engineer of Çimsa’s Mersin Plant. From February 2005 to October 2018, he acted as Product Manager in Kayseri Plant, Plant Manager in Kayseri, and Plant Manager in Eskişehir and Ankara, respectively. Ömer Sinan GENÇ Plant Manager - Çanakkale Plant Born in 1980 in Samsun, Ömer Sinan Genç graduated from Ege University Department of Chemical Engineering in 2002. Since 2007, he served as Production Engineer in Ladik Plant, Semi-Finished Good Supervisor in Büyükçekmece Plant and Production Manager in Büyükçekmece Plant in our company. He was appointed as Plant Manager of Ladik on 02.10.2017, and then appointed as Plant Manager of Çanakkale on 15.10.2018. Devrim Özgür DEMİR Plant Manager - Ladik Plant Born in 1970, Devrim Özgür Demir graduated from Anadolu University Chemical Engineering Department in 1994. He started his career in 1997 as Quality and Production Engineer in Habaş Industrial and Medical Gases company, and acted as Production & Maintenance Supervisor in Karçimsa and as Clinker Production Supervisor in Çanakkale Plant, Production Manager in Ladik Plant and Quality Manager in Büyükçekmece Plant, respectively, from August 1997 to October 2018. He was


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appointed as the Plant Manager of Ladik Plant as of 15.10.2018.

Personnel and labor movement, collective labor agreement practices, and rights and benefits provided to the personnel and workers

As of December 31, 2019, the consolidated number of employees (at Akçansa and Karçimsa) is 987. Validity of 2-year collective labor agreement, which was covering the period of 01.01.2018 to 31.12.2019, has ended on December 31, 2019, and the collective labor agreement negotiations for the new term covering 01.01.2020 to 31.12.2021 between Cement Industry Employers’ Association (ÇEİS) and Çimse-İş Labor Union have resulted positively. The negotiations for the new term collective bargaining agreement that will be concluded by and between ÇEİS (Cement Industry Employers’ Association) to which we belong and T. Çimse-İş Labor Union that began on December 18, 2019 resulted in the agreement of the parties and were consummated on January 31, 2020 for 2 years. In line with the provisions of Signed Collective Bargaining Agreement; The outcomes of the agreement are summarized below; - For the 1st year of the agreement, an increase of 13,80%, valid through 01.01.2020, has been applied to the naked hourly wages applicable on 31.12.2019 of the workers, who are working for the company on 01.01.2020 and whose labor agreement is valid on the date the collective bargaining agreement is signed. - For the 2nd year of the agreement, an increase in the rate of CPI of the previous year will be applied to the naked hourly wages applicable on

31.12.2020 of the workers, who are working for the company on 01.01.2021 and whose labor agreement continues. Pursuant to the collective agreement, seniority bonuses are being paid in the months coinciding with the completion of each employee’s five-year seniority term. Prohibition on doing business or competing with the Company

During the period of January 1, 2019 - December 31, 2019, Board Members did not enter any transaction with the company or engage in any activity that constitutes competition in the same areas of activity of the company. Financial Rights

During the period of January 1, 2019 - December 31, 2019, the Company did not lend money to any of the Board Members, nor did it issue a line of credit, extend the terms of debts or credits, or improve their conditions, issue line of credit under the name of personal loan through a third party, or give guarantees such as indemnities in their favor. At the Ordinary General Assembly meeting held on March 29, 2018, it was resolved to pay a monthly remuneration of 8.000 TL to the Board Members. Tamer Saka, Hayrullah Hakan Gürdal, Dr. Carsten Sauerland and Serra Sabancı (resigned on 31.03.2019), Burak Turgut Orhun (resigned on 24.01.2020), Ahmed Cevdet Alemdar waived their remuneration receivables, which have arisen as of their appointments and which will arise until their term ends pursuant to the resolution made about paying a monthly remuneration of 8.000 Turkish lira to the Board Members in the Ordinary General Assembly Meeting.

The Company has established a Remuneration Policy for the Board Members and Executives, and has disclosed it to the public on the corporate website.


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3

Total of salaries and benefits of the executive members

January 1 - December 31,

2019 Short term benefits provided to executive management

6.980.472

Post-employment benefits 1.212.040 Other long term benefits 171.898 Total income 8.364.410 SGK employer’s share 362.765

Research and development activities

Akçansa collaborates with universities, public institutions, sector NGOs and the Heidelberg Technology Center in areas such as training, new product development, before and after sales support, lectures and seminars on cement and concrete technologies at the universities, technical trips for university students, support for university studies on cement and concrete, support for universities with regard to conventions and brochures, and national/ international scientific publications (announcements). Important Completed R&D Projects • Researching the Use of Mineralizers in Clinker Production (Tübitak Teydeb Project) • Researching the Hydration Reactions and Its Impacts on Cement (in cooperation with the Sabancı University) • Establishing the Criteria on Use of Recycled Items from Constructions and Debris Waste (Tübitak Teydeb Project) • Considering Microalgaes as Fuel and as CO2 Catcher in Cement Production Process (Tübitak Teydeb Project) • Development of High Performance Cement and Concrete Products for the 3rd Bosphorus Bridge (Yavuz Sultan Selim Bridge) Project • Development of High Consistency Protected and Performance Cement and Concrete Products for Large Infrastructure Projects • Development of High Consistency and Performance Concrete Products for High Rise Buildings • Development of High Performance Cement and Concrete Products for the 1915 Çanakkale Bridge Project • Project for Monitoring Concrete Samples with RFID Tag (in cooperation with the companies Ankaref and Vuruşkan)

• Concrete Road Project Compacted with Macro Synthetic Fiber Cylinder (in cooperation with the Boğaziçi University and Kordsa) • Project for Designing Cement and Concrete with Advanced Thermal Properties Ongoing R&D Projects: • Use of Activated Natural Minerals as a Substitute to Cement (in cooperation with the Sabancı University) • Nuclear Shielding Performance Concrete Project (in cooperation with the Turkish Atomic Energy Authority) • Tracking of Quality Control Parameters in Cement Production by Advanced Data Analytics • Research of Use of Alternative Mineral Additives in Cement and Concrete Production • Performance Analysis of Cement Grinding Additives

A total of 1426 concrete tests were performed at the Technology Center Laboratory of Akçansa R&D Directorate during 2019 for the purposes of R&D projects, raw material performance at concrete phase, optimization, and specialty product.

Tests carried out in 2019 consists of: • Special Product Tests, • Aggregate Performance Tests, • Cement Performance Tests, • Chemical Additive Tests, • Mineral Additive Tests and • Project-Specific Solution Tests. Aggregate Pollution Tests (Blue Methylene, Sand Test, Sand Equivalent, CaCO3 Determination, 0.063 mm Sieve Washing), and Aggregate Sieve Analyzes are performed periodically at the Technology Center Laboratory. During 2019, 785 lots of aggregate were performed. In addition to these tests, pH, density, solid, and Fourier Transform Infrared (FT-IR) spectrometer tests are also being performed with the results duly recorded. These tests were carried out on 282 different chemical additive specimens in 2019 and the results were reported. As in previous years, in 2019, product development studies for major projects were intensively emphasized. In particular, the design of special products for 1915 Çanakkale Bridge Project was supported. R&D projects and academic studies


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Research and development activities (continued) continued in cooperation with universities and public institutions. Developments in the industry and main factors affecting the industry In the first 11 months of 2019, cement production decreased by 22.9% compared to last year. Approximately 19.3% of the produced cement was exported. From January to November 2019, domestic sales decreased by 30.8%, while cement exports increased by 41.6%. According to Turkish Statistical Institute data, in the January-November period of 2019, the country in which cement and clinker export increased the most was Cameroon, while exports have been made to the countries such as the United Statesof

America, Ghana, Israel, Ivory Coast, Syria and Colombia. In the first nine months of 2019, considering the building permits issued by the municipalities, number of buildings decreased by 57.1% compared to the previous year; surface area decreased by 58%, its value decreased by 48.9%, and the number of apartments decreased by 63.8%. In the first nine months of 2019, considering the occupancy permits issued by the municipalities, number of buildings decreased by 20.6% compared to the previous year; surface area decreased by 7.2%, number of apartment decreased by 11.3%, and the number of apartments increased by 12.3%. Housing sales increased by 54.4% in November 2019 compared to the same month of the previous year.


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Our Production and Production Capacity Our plants and facilities work with the following capacities.

Plant Capacities (Metric Tons/Year)

Cement Production Capacity

Clinker Production Capacity

Operating Capacity

Büyükçekmece 2.527.776 1.943.000 - Çanakkale 5.500.000 4.450.000 - Ladik 1.013.760 643.500 - Ambarlı - - 745.200 Aliağa - - 224.400 Yalova - - 384.000 Karçimsa 98.720 41.500

Area of business of the company and its position in the market Akçansa is the most prominent player in Turkey’s cement sector. With this leadership comes the responsibility of moving both the industry and its reputation forward. As a leading company, Akçansa deems itself responsible for increasing the values created for society and its stakeholders and for providing sustainable growth. Full compliance with the legislation is of utmost importance for Akçansa. In this context, environmental permits of our Büyükçekmece and Ladik Plants were renewed to be valid through 2023, and the environmental permit of our Çanakkale Plant was renewed to be valid through 2024. In addition to this, ISO 14001:2015 Environmental Management System audit of all three factories were completed successfully in 2018. In May, the environmental audit conducted by the HeidelbergCement expert at our Çanakkale plant has also concluded successfully. Environmental permit processes of our ready-mixed concrete, aggregate, port and terminal facilities are also carried out in compliance with the legislation. With its principle of sustainable growth and business goals, Akçansa carries out its activities by planning them in the best manner first. The company, which has transparent, open and continuous communication with all its stakeholders in both business applications and social responsibility projects, converts its activities into value-adding communication projects and has become a reputable company. Akçansa aims to advance its existing powerful relationships with its social partners in order to perpetuate its leadership. Akçansa, which makes one of the largest investments in society

and in its social stakeholders, is rewarded with the prestige of making such an investment.

Giving assistance to the regions where it operates, making a contribution to growth with its plants and facilities and developing public projects in areas such as sports, education and culture are some of the ways for the company to demonstrate its determination to create social value.

Akçansa has fully accepted and adopted the principles of sustainable development and performance culture. Akçansa’s competitive power, financial performance and innovative technology that extends from specialty products to using alternative fuels and raw materials, their respect for the environment, their work on social responsibility projects and advanced applications in the area of human resources have all been combined to continuously emphasize their leadership in the sector. Awarded with “Golden Standard” in its first application and assessment in “IIP - Investors in People”, the first and only international human resources standard, in 2016 for its leading efforts in the field of human resources, Akçansa has ranked first in its sector, 4th in Turkey and within 7% of the organizations in the entire world. In 2019, it was entitled to receive this standard for the second time after field reviews of local and foreign evaluators and interviews with all employee groups. Akçansa has become the first company in Turkey, showing success with “Gold Standard” in the 6th Generation.


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Area of business of the company and its position in the market (continued) While Akçansa utilizes the country’s natural resources through industrial investments and contributes to the economy with employment, production and exports, they also use the resources obtained through industrial and commercial activities to create value in the areas of culture, sports, arts, education and the environment. Akçansa applies the highest standards in all of its processes - from using alternative fuel and raw materials to displaying sensitivity in protecting the environment, as well as in work safety and ethics. Thanks to the SEÖS-Continuous Emission Measurement System (high technology measuring devices) installed in all the main chimneys in its factories, dust and all combustion gases in the chimneys are measured instantly 24/7, and these values are monitored instantly by the Ministry of Environment and Urbanization and Provincial Directorates of Environment and Urbanization. Accredited organizations perform regular measurements each year to inspect compliance with all legal requirements in regards to all filters in the plants, as well as dust and gas emissions in the chimneys. Also, measurements are made quarterly and reported to the Ministry of Environment and Forestry in regards to the furnaces where waste materials are burned. The Akçansa Büyükçekmece plant is the first plant in Turkey to have built specially designed waste feeding systems, which are able to feed both waste oils and tires automatically. The plant is increasingly using alternative fuels by burning contaminated waste and other similar waste. The laboratory began operations in the Akçansa Büyükçekmece plant at the start of 2008. This required the purchase of the necessary equipment to build an alternative fuel and raw material laboratory, in which analysis can be performed as stipulated by the law and regulations concerning waste management. The plant also houses an R&D department and laboratory that provide services for all cement and ready-mixed concrete production operations of the Company. Within the scope of university cooperation, Akçansa has provided material analysis and consultancy support to several postgraduate and PhD theses to date. As part of the R&D operations, studies with significant results, which have been published in national and international scientific publications, were carried out with the universities, suppliers, customers and public authorities. In addition to this,

several joint projects have been implemented to support the sector’s development in cooperation with the Turkish Ready-Mixed Concrete Association Members. Betonsa continues to organize periodic training programs for its customers, construction companies, producers of concrete components, civil engineers, audit companies, engineers and technicians joining from domestic and central authorities, and university students. Training subjects include concrete technology and its durability, as well as the importance of maintenance and curing. Additionally, information on current issues such as concreting techniques in cold and hot weather conditions are shared. Investment-related developments, and status and level of using incentives, if any The Company possesses no investment incentive certificate as of December 31, 2019. As of December 2019, total consolidated investment expenditures were 80.6 million TL. Investments: • In order to increase the export capacity of our

Çanakkale plant, our “Increasing Ship Loading Capacity” project, which we started in 2018, was completed in the first quarter of 2019 and the barriers in our export transactions has been eliminated. (SNCR systems have been installed and commissioned in our Büyükçekmece plant before)

• Our investment feasibility studies for increasing our alternative fuel utilization rate are proceeding in all our plants.

• Our investments for Worker's Health and Safety and Environment continue at full speed in all our factories.

• Within the scope of ready-mixed concrete investment projects, studies have been carried out for new legal regulations regarding worker's health and safety and the environment.


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Corporate Governance Principles Akçansa Çimento Sanayi ve Ticaret A.Ş. has exercised due diligence in implementing the principles stated in the “Corporate Governance Principles” published by the Capital Market Board (CMB) during the period between January 1, 2019 and December 31, 2019. Our company aims to realize works in compliance with the Corporate Governance Principles in the decisions and transactions concerning shareholders' rights, public disclosure and transparency and the operations related to stakeholders and the Board of Directors. Accordingly, the implementation of these principles are among the main objectives of our Company, depending on the responsibility of informing all shareholders and corporate governance principles. It has exercised due diligence in the implementation of the principles included in the Corporate Governance Principles published by the Capital Markets Board (CMB). In terms of other principles that are not compulsory and not fully compliant, there is no conflict of interest between our Company and stakeholders. Corporate Governance Compliance Report (UYF) and Corporate Governance Information Form (KYBF) for 2018, which are in compliance with the new reporting formats of Akçansa Çimento Sanayi ve Ticaret A.Ş. and which have been issued pursuant to the resolution no. 2/49 of the Capital Markets Board of Turkey on 10.01.2019, have been published in Public Disclosure Platform on 11.03.2019. The latest status of the announcements regarding the Corporate Governance Compliance Report (URF) and the Corporate Governance Information Form (KYBF) can be found at the following link: https://www.kap.org.tr/tr/sirket-bilgileri/ozet/838-akcansa-cimento-sanayi-ve-ticaret-a-s Vision To achieve a sustainable growth beyond all borders within the construction materials industry as a company trusted by all stakeholders and offering the most preferred business model. Mission With our culture of dedication for social, environmental, legal and ethical values, to BECOME A PIONEERING CONSTRUCTION MATERIALS COMPANY THAT IMPROVES THE QUALITY OF LIFE, by creating value for our customers through innovative products, services and solutions; or our stakeholders, through superior financial

performance; and for our employees, who make up the backbone of our operations, through constant development opportunities and our business model. The Board of Directors hold discussions with the stakeholders to define the strategic objectives of the company for the next 3 years. Furthermore, the annual budgets prepared as part of these strategic objectives, which are approved by the Board of Directors. The Board of Directors are well informed of the implementation processes of decisions made in line with comparative presentations made to company officials during meetings. These presentations contain comparisons of the current year’s budget and the actual results, as well as the comparison of the same periods of previous years, to be presented to the Board of Directors. The Board of Directors repeats this process at least four times a year. Public Disclosure and Transparency The Company strives to fulfill its responsibilities of public disclosure and transparency as a publicly traded company. As per the principles of public disclosure and transparency and our information policy, with the e-Company application at the Central Registry Agency, our investors are given access to "Information Society Services". Information Society Services can be reached via the www.mkk.com.tr e-Company Companies Information portal or the Information Society Services section in the Investor Relations section of our Company's website www.akcansa.com.tr. The company has a registered website Internet address: www.akcansa.com.tr The corporate website is also available in English. This section has been provided for the international investors. As of the end of the 12th month of 2019, 10 In-house (office visit), 1 analyst meeting, 2 teleconferences, 13 interviews abroad and 1 conference were held. Under the Corporate Governance Principles, the company maintains a website accessible to all shareholders and investors at www.akcansa.com.tr. The issues specified in the Corporate Governance Principles are included. The corporate website covers information such as corporate presentations, products and services, management systems, financial indicators, annual activity reports, an investor center, financial statements, information policy, environmental activities, social responsibility activities and human resources. The main content of the website is as follows:

• Detailed information on corporate identity • Vision and Mission


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• Information on the Board Members and the Executive Team

• Organization and shareholding structure of the Company

• Articles of Association of the Company • Trade registry information • Financial data • Press releases • Material Event Disclosures • Date and agenda of the General Assembly,

explanations of the agenda items • Minutes of the General Assembly and the

attendance list • Sample proxy form • Corporate Governance practices and

compliance report • Dividend distribution policy and its history,

and capital increases • Disclosure Policy • Related party transactions report • Remuneration Policy for the Board Members

and the Executives • Frequently Asked Questions

Dividend Distribution Policy of Our Company: Dividend Distribution Policy of the Company: Akçansa Çimento Sanayi ve Ticaret A.Ş. Dividend Distribution Policy has been set pursuant to the provisions of the Turkish Commercial Code, the Capital Markets Board legislation, and other legislation, as well as the Articles of Association provisions with regard to dividend distribution, and in keeping with the middle and long-term strategies, and investment and financial plans of Akçansa Çimento Sanayi ve Ticaret A.Ş. by taking into consideration the country’s economy and the industry’s state, and by pursuing a balance between the shareholders’ expectations and the company’s needs. Although the General Assembly adopted a decision to determine the amount of dividend to be distributed, it has resolved to distribute at least 50 percent of the distributable profit in cash and/or as bonus share. While it was resolved to distribute dividends equally and as soon as possible regardless of the whole share amount, and their issue and acquisition dates; distribution shall be made to shareholders at the date determined by the General Assembly following its approval within stipulated legal periods. Pursuant to Article 33 of the Articles of Association, if authorized by the General Assembly, it shall also

be possible to distribute advance dividends to shareholders with the resolution of the Board of Directors. The General Assembly shall be authorized to transfer a certain part or all of the net profits as excess reserve fund. In the event that the Board of Directors of Akçansa Çimento Sanayi ve Ticaret A.Ş. proposes to the General Assembly not to distribute dividends, at the General Assembly meeting, shareholders shall be provided information on the reasons and the manner of use of the undistributed profits. Similarly, this information shall be available to the public in the annual report and the corporate website. Dividend distribution policy shall be submitted for the approval of the shareholders at the General Assembly Meeting. The Board of Directors reviews this policy every year in line with any adversities in the national and global economic conditions, and the state of current projects and funds. Any changes made to the policy shall be submitted for the approval of the shareholders at the first General Assembly following the changes, and shall be disclosed to the public at the corporate website. Dividend Distribution Policy was submitted for the information of the shareholders at the General Assembly on March 26, 2014. Human Resources Policy Believing that the value attached to the human resources plays the biggest role in the success achieved and considering its employees in the foundation of all of its operations, Akçansa adopts the target of having the practices ensuring continuous development and high performance, having a qualified labor, setting an example in the industry, and always being the preferred employer. Akçansa brings its employees together under the identity of being an “Akçansa member.” thanks to a partnership between Sabancı Holding and HeidelbergCement, employees enjoy a trust and respect for each other in a climate that nurtures employee satisfaction and productivity, along with modern human resources practices. Akçansa establishes human resources strategies and objectives by taking into consideration the national and global economic environment, and the individual conditions specific to the cement, ready-mixed concrete and aggregate sectors and port business, as well as the company’s business goals. In Akçansa’s equal work environment, candidates are under no circumstances asked to provide information regarding their religion, language, race,


43

denomination, gender, and physical state or lifestyle preferences. All practices that may be perceived as discriminatory are avoided. To date, the company has not received any negative feedback from employees with regard to discrimination. The group collective bargaining agreement that was signed for the period of 01.01.2018 - 31.12.2019 between the Union of Cement Industry Employers (CEIS) to which we are member and T.Cimse-Is Union was expired, and a new group collective bargaining agreement was concluded for the period of 01.01.2020 – 31.12.2021 on 31.01.2020. Risk Management and Internal Control Mechanism Pursuant to CMB communiqués on Determination and Implementation of Corporate Governance Principles, the Corporate Governance Committee has been established; according to the provisions of the communiqué, it has been resolved to appoint Independent Board Members Mehmet Sami as the Chairman of the Corporate Governance Committee and Dr. Markus C. Slevogt and Financial Affairs Director Dinçer Bulan (appointed as of 05.09.2018) as the Corporate Governance Committee Members, and to empower the Committee to carry out the duties of the Nomination and the Remuneration committees as well. An Internal Audit Manager and Internal Audit Specialists serve in the company. Objectives and principles behind their activities are clearly described below. With the creation of the Audit Committee, they effectively fulfill the tasks assigned thereto by the Board of Directors within the framework of the Audit Committee Bylaws. Risk management is based on describing and monitoring all potential risks to which our company may be exposed. The Company and its executives classified all potential risks upon which necessary precautions have been adopted therefor. These include: all types of financial risks such as asset-liability, credibility, capital/ indebtedness, exchange rate risks and risk factors that may directly influence the financial position of the company; natural risks, in relation to which all facilities are insured to minimize the risk posed by natural disasters such as fire, earthquake, and so on, which may affect the performance of the company.

The SAP system is employed to prevent any loss of data and ensure systems are unaffected in the event of a disaster. This system allows instant tracking of operating results, as well as measurement and processing, aiding the decision support processes. Representing a key technological utility, the SAP enhanced the efficiency of the internal control mechanism by eliminating human errors. Furthermore, emphasis is put on investments such as the company back-up system. In parallel with the risk management and control system in place at our shareholders Hacı Ömer Sabancı Holding A.Ş. and HeidelbergCement Group, effective risk management processes have been devised and launched. Corporate Risk Manager provide information to the Early Detection of Risk Committee with periodic reports within the company. Financial sources and risk management policies of the Company The financing needs of the company are met with short and medium-long term export and foreign currency loans in line with the export potential of the company. Risk management is based on describing and monitoring all potential risks to which our company may be exposed. The Company and its executives classified all potential risks upon which necessary precautions have been adopted therefor. These include: all types of financial risks such as asset-liability, credibility, capital/ indebtedness, exchange rate risks and risk factors that may directly influence the financial position of the company. Natural risks, in relation to which all facilities are insured to minimize the risk posed by natural disasters such as fire, earthquake, and so on, which may affect the performance of the company. The SAP system is employed to prevent any loss of data and ensure systems are unaffected in the event of a disaster. This system allows instant tracking of operating results, as well as measurement and processing, aiding the decision support processes. Representing a key technological utility, the SAP enhanced the efficiency of the internal control mechanism by eliminating human errors. Furthermore, emphasis is put on investments such as the company back-up system. Our company monitors receivable risk, currency risk, concentration, competition and sales channels efficiency risks on a monthly basis.


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Compliance Status

Yes Partially No Exempted Irrelevant Corporate Governance Compliance

Report

1.1. FACILITATION OF USE OF THE RIGHTS OF SHAREHOLDER

1.1.2 - Information and explanations to be able to affect the use of the rights of the shareholders are currently available for investors on the corporate website of the partnership.

X

1.2. RIGHT TO RECEIVE INFORMATION AND INVESTIGATE

1.2.1- The management of the company refrained from making transactions complicating the realization of special audits.

X

1.3. GENERAL ASSEMBLY 1.3.2 - The Company ensured that

the agenda of the General Assembly to be clearly stated and each proposal to be submitted under a separate title.

X

1.3.7 - Persons, who have a privileged access to partnership information, have informed the board of directors to be added to the agenda in order to provide information in the General Assembly concerning the transactions they have made on their behalf within the scope of the activity of the partnership.

X There is no process on the subject.

1.3.8 - Concerning the matters having priority in the agenda, members of the board of directors, other relevant persons, officials and auditors who are responsible for the preparation of the financial statements were present at the general assembly meeting.

X

1.3.10 - In the general assembly agenda, the amounts of all donations and aids and those benefiting from them are included in a separate article.

X

1.3.11 - The General Assembly meeting was held as open to the public, including stakeholders and media, without the right to speak.

X The General Assembly meeting is not held as open to the media for security and time management reasons.

1.4. VOTING RIGHTS 1.4.1 - There are no restrictions and

practices that make it difficult for shareholders to exercise their voting rights.

X


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1.4.2 - The company does not have any shares with a privileged voting right.

X

Compliance Status Yes Partially No Exempted Irrelevant

1.4.3 - The Company has not exercised its voting rights at the General Assembly of any partnership with which it has a mutual participation relationship, which also brings the controlling relationship.

X Our company does not have a partnership in mutual participation relationship.

1.5. MINORITY RIGHTS 1.5.1- The company has paid utmost

attention to the exercise of minority rights.

X

1.5.2 - Minority rights have also been granted to those with a ratio less than one-twentieth of the capital as per the articles of association, and the scope of minority rights has been regulated in the articles of association.

X It is not regulated in the Articles of Association, as well as the provisions of the TCC and CMB provisions are applied.

1.6. DIVIDEND RIGHT 1.6.1 - The profit distribution policy

approved by the General Assembly is disclosed to the public on the corporate website of the partnership.

X

1.6.2 - The dividend distribution policy contains minimum information clear enough to enable shareholders to foresee the profit distribution procedures and principles that the partnership will obtain in the future.

X

1.6.3 - The reasons for not distributing profits and the usage of undistributed profit are specified in the relevant article of the agenda.

X

1.6.4 - The Board of Directors has reviewed whether there is a balance in the profit distribution policy between the interests of the shareholders and the partnership.

X

1.7. TRANSFER OF SHARES 1.7.1 - There is no restriction

complicating the transfer of shares. X

2.1. CORPORATE WEBSITE

2.1.1 - The corporate website of the Company contains all items in the corporate governance principles numbered. 2.1.1.

X

2.1.2 - Shareholding structure (names, privileges, number of shares and rate of real person shareholders holding more than 5% of issued

X


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capital) is updated at least every 6 months on the corporate website.


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Compliance Status

Yes Partially No Exempted Irrelevant 2.1.4 - The information on the

corporate website of the company has been prepared in foreign languages selected according to the need, with the same content as Turkish.

X Website: www.akcansa.com.tr The issues specified in the Corporate Governance Principles are included. The corporate website is also available in English. This section is also prepared for the benefit of international investors.

2.2. Annual Report 2.2.1 - The Board of Directors

ensures that the annual activity report fully and accurately reflects the activities of the company.

X

2.2.2 - The annual report contains all the elements included in principle 2.2.2.

X

3.1. COMPANY POLICY RELATED TO THE STAKEHOLDERS

3.1.1 - The rights of stakeholders are protected within the framework of relevant regulations, contracts and goodwill rules.

X

3.1.3 - Policies and procedures regarding stakeholders' rights are published on the corporate website.

X

3.1.4 - Necessary mechanisms have been set up for stakeholders to report transactions that are contrary to the legislation and ethically inappropriate.

X

3.1.5 - The Company handles conflicts of interests between stakeholders in a balanced way.

X

3.2. SUPPORTING THE PARTICIPATION OF STAKEHOLDERS IN COMPANY MANAGEMENT

3.2.1 - Employee participation in management is regulated by the articles of association or internal regulations.

3.2.2 - Regarding important decisions that have consequences for stakeholders, methods such as questionnaires/consultations have been applied to obtain the views of stakeholders.


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Compliance Status

Yes Partially No Exempted Irrelevant 3.3. HUMAN RESOURCES

POLICY OF THE COMPANY

3.3.1 - The company has adopted an employment policy having equal opportunity principle and a succession plan for all key management positions.

X Participation of the employees in the management is carried out through meetings held at the company (at least once a year) and annual target determination and performance evaluation meetings. Also, employees give feedback to the management and colleagues through the 360 degree feedback mechanism, and the results are handled in various management meetings, and action plans are formed for necessary changes.

3.3.2 - Criteria for recruitment are determined in writing.

X Dealer meetings and customer loyalty surveys are held with customers. Also, communication channels are kept open for other stakeholders (suppliers, business partners, etc.).

3.3.3 - The Company has a Human Resources Development Policy and organizes trainings for employees in this context.

X

3.3.4 - Meetings were organized to inform the employees about the company's financial status, remuneration, career planning, education and health.

X

3.3.5 - Resolutions that may affect employees have been reported to them and to employee representatives. Opinions of the relevant labor unions were also received on these issues.

X

3.3.6 - Job descriptions and performance criteria were prepared in detail for all employees, announced to the employees and used in remuneration decisions.

X


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Compliance Status

Yes Partially No Exempted Irrelevant 3.3.7 - Measures such as

procedures, trainings, creation of awareness, goals, monitoring, and complaint mechanisms have been taken in order to prevent discrimination among employees and to protect employees from internal physical, mental and emotional ill-treatment.

X

3.3.8 - The company supports the freedom of forming association and effective recognition of the collective bargaining right.

X

3.3.9 - A safe working environment is provided for employees.

X

3.4. RELATIONS WITH CUSTOMERS AND SUPPLIERS

X

3.4.1 - The Company has evaluated customer satisfaction and operated with an unconditional customer satisfaction approach.

3.4.2 - In case there is a delay in processing the demands of the customer regarding the goods and services purchased, this situation is reported to the customers.

X

3.4.3 - The Company adheres to quality standards regarding goods and services.

X

3.4.4 - The Company has controls to protect the confidentiality of sensitive information of customers and suppliers under trade secrets.

X

3.5. ETHICAL RULES AND SOCIAL RESPONSIBILITY

X

3.5.2- Our partner is sensitive to social responsibility. It has taken measures to prevent corruption and bribery.

X

4.1. FUNCTION OF THE BOARD OF DIRECTORS

4.1.1 - The board of directors ensures that strategy and risks not to threaten the long-term interests of the company and an effective risk management to be implemented.

X

4.1.2 - The agenda and minutes of the meeting reveal that the board of directors has discussed and approved the company's strategic goals, identified the resources needed, and that the management's performance has been audited.

X


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Compliance Status

Yes Partially No Exempted Irrelevant 4.2. ACTIVITY PRINCIPLES OF

THE BOARD OF DIRECTORS

4.2.1 - The board of directors has documented its activities and presented it to the shareholders.

X

4.2.2 - The duties and authorities of the members of the board of directors are explained in the annual report.

X

4.2.3 - The board of directors has established an internal control system that is suitable for the scale of the company and the complexity of its activities.

X

4.2.4 - Information on the functioning and effectiveness of the internal control system is provided in the annual report.

X

4.2.5 - The duties of the chairman of the board of directors and the chief executive officer (general manager) are separated from each other and defined.

X

4.2.7 - The board of directors ensures that the investor relations department and the corporate governance committee work effectively, and it closely worked in cooperation with the investor relations department and the corporate governance committee to resolve disputes between the company and shareholders and to communicate with the shareholders.

X

4.2.8 - Regarding the losses that the board members may cause to the company due to their faults during their duties, the Company has acquired executive liability insurance for a price exceeding 25% of the capital.

X

4.3. STRUCTURE OF THE BOARD OF DIRECTORS

4.3.9 - The company has set a minimum 25% target for the ratio of female members on the board of directors and established a policy to achieve this goal. The structure of the board of directors is reviewed annually and the nomination process is carried out in accordance with this policy.

X The company does not have a policy on this issue.

4.3.10 - At least one of the members of the audit committee has 5 years of experience in auditing/accounting and finance.

X


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Compliance Status

Yes Partially No Exempted Irrelevant 4.4. METHOD OF THE BOARD

MEETINGS

4.4.1 - All members of board of directors have physically attended most of the board meetings.

X

4.4.2 - The board of directors has set a minimum period for the information and documents related to the agenda items to be sent to all members before the meeting.

X

4.4.3 - The opinions of the members who could not attend the meeting but who informed his/her opinions to the board of directors were presented for the information of the other members.

X

4.4.4 - Each member has one vote in the board of directors.

X

4.4.5 - How to hold the meetings of the board of directors has been put in writing by internal regulations.

X

4.4.6 - The meeting minutes of the board of directors reveal that all items on the agenda are discussed, and the records of the resolutions are prepared to include dissenter opinions.

X

4.4.7 - Performance of other duties outside the company by the members of the board of directors are restricted. The duties taken by the members of the Board of Directors outside the company were informed to the shareholders at the general assembly meeting.

X Members of the Board of Directors may take other duties outside the company. It is not bound by certain rules and not limited.

4.5. COMMITTEES ESTABLISHED WITHIN THE BOARD OF DIRECTORS

4.5.5 - Each board member takes in charge in only one committee.

X As per the structure of the Board of Directors and due to the obligations required by the CMB Legislation, one member compulsorily participates in more than one committee.

4.5.6 - The committees invited the people whom they deem necessary to receive their opinions to the meetings and received their opinions.

X

4.5.7 - Information on the independence of the person/entity from which the committee received consultancy service is included in the annual report.

X Consultancy service has not been received.


52

Compliance Status

Yes Partially No Exempted Irrelevant 4.5.8 - A report on the results of

the committee meetings was prepared and presented to the members of the board of directors.

X

4.6. FINANCIAL RIGHTS PROVIDED TO MEMBERS OF THE BOARD OF DIRECTORS AND MANAGERS WITH ADMINISTRATIVE RESPONSIBILITY

4.6.1 - The board of directors performed a performance evaluation to evaluate whether it fulfilled its responsibilities effectively.

X

4.6.4 - The Company did not provide loan facilities, lend money to any of the members of the board of directors or the managers with administrative responsibilities, or it did not The company did not extend the period of the loan borrowed, improve its conditions, provide loan facilities under a personal loan title through third parties or provide any guarantees like suretyship in favor of them.

X

4.6.5 - The remuneration given to the members of the board of directors and the managers with administrative responsibilities are explained on individual basis in the annual report.

X Salaries, premiums and similar benefits and total payments to senior executives are disclosed to the public in the annual report and in the footnotes of the financial statements. Since the remuneration given to the Members of the Board of Directors is determined by the decision of the General Assembly, an explanation is made on an individual basis. Payments to managers who have administrative responsibilities are made in accordance with remuneration policies, taking into account performance criteria. Since this information is personal information, it cannot be disclosed on an individual basis, as it creates conflict with another legislation.


53

Corporate Governance Information Form

SHAREHOLDERS 1.1. Facilitating the Use of Shareholder Rights Number of investor conferences and meetings organized by the company throughout the year

As of the end of the 12th month, 10 Inhouses (office visits), 1 analyst meeting, 2 teleconferences, 13 interviews abroad and 1 conference were held in 2019.

1.2. Right to Demand Information and Examine Number of special auditor requests No special auditor requests were made. Number of special auditor requests accepted at the General Assembly meeting

No special auditor requests were made.

1.3. General Assembly Link to the PDP announcement where the information requested under Principle 1.3.1 (a-d) is announced

https://www.kap.org.tr/tr/Bildirim/742764

Whether the documents related to the general assembly meeting are also submitted in English simultaneously with Turkish.

No It is not published simultaneously. However, there are English versions of the necessary documents in the English section of our website.

Within the scope of Principle 1.3.9, the approval of the majority of the independent members or the links of the PDP announcements related to the transactions of the participants without unanimity

There is no transaction without unanimity.

Links to PDP announcements concerning related party transactions under Article 9 of the Corporate Governance Communiqué (II-17.1)

There are no Related Party transactions under Article 9.

Links to PDP announcements related to the widespread and continuing transactions under Article 10 of the Corporate Governance Communiqué (II-17.1)


The name of the section on the company's corporate website, which includes the policy on donations and aids

Investor Center/Corporate Governance/Donation and Aid Policy at our website www.akcansa.com.tr

Link to the PDP announcement, which includes the minutes of the general assembly where the policy on donations and aids is accepted


Article number regulating the participation of stakeholders in the general assembly in the Articles of Association

Articles of Association Article 28 General Assembly Internal Directive: http://www.akcansa.com.tr/investor center/institutional management/Akçansa General Assembly Internal Directive

Information about stakeholders attending the General Assembly

Company shareholders and representatives, members of the Board of Directors, auditor of the Company, General Manager and personnel preparing the General Assembly attended the General Assembly.

1.4. Voting Rights Whether there is a privilege in the vote

No

Privileged shareholders and voting rates if there is a privilege in the vote

-


54

Shareholding rate of the largest shareholder

39,72%

1.5. Minority Rights Whether minority rights have been extended in the company's articles of association (in terms of content or proportion)

No

If minority rights have been extended in terms of content and ratio, state the number of the relevant articles of association.

There is no regulation regarding minority rights.

1.6. Dividend Right The name of the section with the profit distribution policy on the corporate website

Investor Center/Corporate Governance/Profit Distribution Policy on our website www.akcansa.com.tr

In case the board of directors proposes not to distribute profit to the general assembly, the minutes of the general assembly agenda item indicating the reasons for this and the way of using the undistributed profit.

Profit distribution was made.

In case the board of directors proposes not to distribute profit to the general assembly, the link of the PDP announcement where the relevant general assembly minutes is included

Profit distribution was made.

General Assembly Date

Number of annotation requests sent to the company regarding the agenda of the General Assembly

Participation rate of shareholders to the general assembly

Proportion of directly represented shares

Proportion of shares represented by proxy

Name of the section on the corporate website where the minutes of the general assembly meeting are shown, indicating the positive and negative votes regarding each agenda item

Name of the section on the corporate website that contains all the questions posed at the general assembly meeting and the answers given to them

Article or paragraph number of the minutes of the General Assembly meeting related parties

Number of people who have access to shareholding information in a privileged manner, notifying the Board of Directors (List of learners from inside)

Link of the general assembly statement published in PDP

29.03.2018

0 81,88% 0,01% 81,86% The company's Investor center/Corporate Identity/General Assembly Meeting at our web address www.akcansa.com.tr -

The company's Investor center/Corporate Governance/General Assembly Information at our web address www.akcansa.com.tr

- 85 https://www.kap.org.tr/tr/Bildirim/671422

26.03.2019

0 82,23% 0,02% 82,20% The company's Investor center/Corporate Identity/General Assembly Meeting at our web address www.akcansa.com.tr

The company's Investor center/Corporate Governance/General Assembly Information at our web address www.akcansa.com.tr

- 127 https://www.kap.org.tr/tr/Bildirim/749841


55

PUBLIC DISCLOSURE AND TRANSPARENCY

2.1. Corporate Website Names of the sections on the corporate website containing the information requested in the corporate governance principle numbered 2.1.1.

It is included in the Investor Center-Corporate Identity section of the company's corporate website www.akcansa.com.tr.

The section of the corporate website, where the list of real person shareholders, directly or indirectly holding more than 5% of the shares

It is included in the Investor Center-Corporate Identity-Shareholding Structure section of the company's corporate website www.akcansa.com.tr.

Languages of corporate website Turkish/English 2.2. Activity Report Page numbers or section names in which the information specified in the corporate governance policy numbered 2.2.2 is included in the annual report

a) Page number or section name with the duties of the board members and executives outside the company and the declarations of independence of the members

General Information section of the 2019 Annual Report, the section stating the authorities and responsibilities of the members of the Board of Directors and managers, and the the section stating Number, Structure and Independence of the Committees Established within the Board of Directors

b) Page number or section name of the information regarding the committees established within the Board of Directors

Section including general Information of the 2019 Annual Report, Section including Number, Structure and Independence of the Board Members and the Committees Established within the Board of Directors

c) Page number or section name of the board of directors' number of meetings during the year and the attendance status of the members

Section of the 2019 Annual Report including Operating Principles of the Board of Directors

ç) Page number or section name of the information about the legislative changes that may significantly affect the company activities

-

d) Page number or section name of the information about important lawsuits filed against the company and its possible consequences

Section of the 2019 Annual Report including lawsuits filed against the company

e) Page number or section name of the information regarding the conflicts of interest between the company and the institutions from which it receives services such as investment consultancy and rating, and the measures taken to prevent them

-

f) Page number or section name of information on mutual participations where direct participation rate in the capital exceeds 5%

It has no mutual participation.

g) Page number or name of the section containing the information about the social rights of employees, their vocational education and corporate social responsibility activities related to the company activities resulting in other social and environmental results.

Section including 2019 Annual Report Staff and worker movements, collective bargaining agreement practices, rights and benefits provided to staff and workers, and Human Resources Policy

STAKEHOLDERS

3.1. Company Policy Concerning Stakeholder The name of the section with the compensation policy on the corporate website

-

Number of judicial decisions finalized against the company due to violation of employee rights

6

Title of the official regarding the notification mechanism

Akçansa Çimento Sanayi ve Ticaret A.Ş. Internal Audit and Compliance Department


56

Information of company's access to the notification mechanism

[email protected] - [email protected] / - 0212- 385 85 85-216-571 30 00

3.2. Supporting Stakeholders' Participation in Company Management

The name of the section on the corporate website that contains the internal regulations regarding the participation of the employees in the management bodies.

-

Management bodies in which employees are represented

Labor Union

3.3. Human Resources Policy of the Company The role of the board in developing the succession plan for key management positions

The management succession planning is reviewed annually and presented to the chairman of the Board of Directors.

Name of the section on the corporate website that includes equality of opportunity and personnel recruitment criteria, or a summary of the relevant articles of the policy.

-

Whether there is an employee stock ownership programme

There isn't an employee stock ownership programme

The name of the section containing the human resources policy, which includes measures to prevent discrimination and ill-treatment on the corporate website, or a summary of the relevant articles of the policy.

It is found under the heading at http://www.akcansa.com.tr/sustainability/business-ethics-rules. It is unacceptable to discriminate among employees within the organization for language, race, color, gender, political thought, belief, religion, sect, age, physical disability and similar reasons. A positive and harmonious working environment that supports cooperation is created and conflict environments are prevented, so that people with different beliefs, thoughts and opinions work in harmony.

The number of judicial decisions finalized against the company due to liability for work accidents

1

3.5. Ethical Rules and Social Responsibility The name of the section that contains the ethical rules policy on the corporate website

http://www.akcansa.com.tr/yatirimci-merkezi/ Corporate Governance/Business Ethics Rules

The name of the section that contains the corporate social responsibility report on the corporate website If there is no corporate social responsibility report, measures taken on environmental, social and corporate governance issues

It is included under the heading of Akçansa Social Responsibility at http://www.akcansa.com.tr/.

Measures taken to combat all forms of corruption, including impropriety and bribery

Anti-bribery and anti-corruption policy under http://www.akcansa.com.tr/ investor center/Corporate Governance section


57

BOARD OF DIRECTORS-I

4.2. Operating Principles of the Board of Directors Date of the latest board performance evaluation 18.02.2020

Whether independent experts are used in the board performance evaluation

No

Whether all the board members have been released Yes

Names of the members of the board of directors to whom authorities are given with the distribution of duties and the content of the said authorities

Tamer Saka - Chairman of the Board of Directors, Hayrullah Hakan Gürdal Vice Chairman of the Board of Directors, Carsten Sauerland Board Member

Number of reports submitted by the internal control unit to the supervisory board or other relevant committees

4

Name or page number of the section, in which the evaluation regarding the effectiveness of the internal control system is included, in the annual report.

Risk Management and Internal Control Mechanism in the 2019 Annual Report and the Company's sources of finance and risk management policies

Name of the chairman of board of directors Tamer Saka Name of chief executive / general manager Umut Zenar Link to the PDP announcement stating the reason for the chairman and chief executive officer/general manager to be the same person

The Chairman of the Board of Directors and the General Manager are different individuals.

The link of the PDP announcement that, by the defects of the members of the board of directors during their duties, the damages they may cause in the company are insured for a price exceeding 25% of the company's capital.

Group insurance has been made regarding the responsibilities of the Members of the Board of Directors, but there has been no PDP announcement.

Name of the section that provides information on the diversity policy to increase the ratio of female board members on the corporate website

There is no policy published on our website in this regard.

Number and rate of female members -


58

Name-Surname

Person Acting on Behalf of Legal Entity Member

Gender

Duty

Profession

First Election Date to the Board of Directors

Whether he/she is an Executive Officer

Duties Undertaken in the Shareholding in the Last 5 Years

Duties Assumed Outside the Shareholding as of the Current Status

TAMER SAKA Male Chairman of Board of Directors

Senior Executive

29.03.2018 Not Executive

Sabancı Holding Cement Group Chairman

HAYRULLAH HAKAN GÜRDAL

Male Vİce Chairman of Board of Directors

Senior Executive


Board Member

HeidelbergCement AG Board Member

DR. CARSTEN SAUERLAND

Male Board Member

Senior Executive


Assistant General Manager (Finance)

HeidelbergCement Group Heidelberg, Germany Group Manager and Chief Financial Officer

AHMED CEVDET ALEMDAR

Male Board Member

Senior Executive


BRİSA BRIDGESTONESABANCI LASTİK SANAYİ VE TİCARET A.Ş. General Manager

MEHMET SAMİ Male Board Member

Senior Executive


Pretium Consulting Partner, Kordsa Independent Board Member, Turcas Petrol Chairman of Corporate Governance Committee-Audit Committee Member

DR. MARKUS CHRISTIAN SLEVOGT

Male Board Member

Senior Executive


Independent Board Member, ÖZBAL ÇELİK BORU SAN.-Chairman of the Audit and Early Risk Detection Committees


59

Whether at least 5 years of experience in the field of Auditing, Accounting and/or Finance

Share in Capital (%)

Represented Share Group

Whether Independent Board Member

Link to the PDP Announcement with the Declaration of Independence

Whether the Independent Member has been evaluated by the Nomination Committee

Whether There are Members Losing Their Independence

Committees and Duties

Yes Not Independent Member




Yes Independent Member

https:// www.kap.org.tr/tr/Bildirim/662851

Evaluated No Chairman of the Audit Committee-Chairman of the Corporate Governance Committee-Member of the Early Detection of Risk Committee

Yes Independent Member

https:// www.kap.org.tr/tr/Bildirim/662851

Evaluated No Audit Committee Member-Corporate Governance Committee Member-Chairman of the Early Detection of Risk Committee


60

BOARD OF DIRECTORS-II 4.4. Method of the Board Meetings Number of board meetings held physically during the reporting period

4

Average attendance rate to board meetings 100%

Whether an electronic portal is used to facilitate the work of the board of directors

No

In accordance with the working principles of the board of directors, how many days before the meeting, information and documents were presented to the members

1 Week

The name of the section that contains information about the internal regulations on how the board meetings are determined on the corporate website.

http://www.akcansa.com.tr/yatirimci-merkezi/Corporate Identity / Article of Association

The upper limit set in the policy that limits members from taking other duties outside the company

None

4.5. Committees Formed Within the Board of Directors Page number containing information about the board committees within the annual report or the name of the relevant section

2019 Annual Report - Number, Structure and Independence of the Committees Formed within the Board of Directors

Link of the PDP announcement, in which the working principles of the committee were announced

It has not been published on the public disclosure platform and is available on our Corporate Website under http://www.akcansa.com.tr Investor Center-Corporate Governance.

Board Committees-I Names of Board Committees

Name of the Committee Stated as "Other" in the First Column

Name-Surname od-f Committee Members

If Committee Chairman or Not

If Board Member or Not

Audit Committee Mehmet Sami Yes Board member

Audit Committee Markus C. Slevogt

No Board member

Corporate Governance Committee Mehmet Sami Yes Board member

Corporate Governance Committee Markus C. Slevogt

No Board member

Corporate Governance Committee Dinçer Bulan No Not board member

Committee of Early Detection of Risk Markus C. Slevogt

Yes Board member

Committee of Early Detection of Risk Mehmet Sami No Board member


61

BOARD OF DIRECTORS-III 4.5. Committees Formed Within the Board of Directors-II Indicate the part of the annual report or corporate website that gives information about the activities of the audit committee (page number or name of the section)


Indicate the part of the annual report or corporate website that gives information about the activities of the corporate governance committee (page number or name of the section)


Indicate the part of the annual report or corporate website that gives information about the activities of the nomination committee (page number or name of the section)


Indicate the part of the annual report or corporate website that gives information about the activities of the early detection of risk committee (page number or name of the section)


Indicate the part of the annual report or corporate website that gives information about the activities of the remuneration committee (page number or name of the section)


4.6. Financial Rights Provided to the Members of the Board of Directors and Managers with Administrative Responsibilities Page number or name of the section of the annual report providing information on operational and financial performance targets and whether they have been met

Information about the sector in which the business operates and its place in this sector

Name of the section of the corporate website that includes the remuneration policy for executive and non-executive members.

The Company's Remuneration Policy for Board Members and Senior Managers is available under the Investor Center - Corporate Governance heading at www.akcansa.com.tr.

Page number or name of the section of the annual report where the salaries given to the members of the board of directors and managers with administrative responsibilities and all other benefits provided

Section on Total of Financial Rights and Fees and Benefits of Senior Management Staff of the 2019 Annual Report


62

Board Committees-II Names of Board Committees

Name of the Committee Stated as "Other" in the First Column

Proportion of Managers Who are Not Responsible for Execution

Proportion of Independent Members on the Committee

Number of Physical Meetings Held by the Committee

Number of Reports to the Board of Directors About the Activities of the Committee

Audit Committee 100% 100% 4 4 Corporate Governance Committee 100% 67% 4 4

Committee of Early Detection of Risk 100% 100% 6 6

Measures required to be taken to improve the financial structure of the business Akçansa continues its hedging-oriented activities which are strengthening the working capital, continuously improve its cost structure, balance foreign currency indexed cash inflows and outflows, support its strong financing capability, and which are in accordance with company procedures. Subsidiaries, affiliates and long term securities of the company

The nature and amount of issued capital market instruments, if any

None. Information on the own shares acquired by the company During the period of January 1, 2019 - December 31, 2019, the company did not acquire its own shares

Company

Location of operations

Shareholding

structure

Share rate (%)

Karçimsa San. ve Tic. A.Ş. Turkey Subsidiary 50,99 Çimsa Çimento San. ve Tic. A.Ş. Turkey Affiliate 8,98 Altaş Ambarlı Liman Tes. A.Ş. Turkey Affiliate 14 Eterpark End. Ürl. İml. Tic. İth. İhr. ve Pazl. A.Ş. Turkey Affiliate 8,73 Liman İşletmeleri ve Nakliyecilik San. ve Tic. A.Ş. Turkey Affiliate 15 Arpaş Ambarlı Römorkaj ve Pilotaj Tic. A.Ş. Turkey Affiliate 16 Ambarlı Kılavuzluk A.Ş. Turkey Affiliate 16


63

Changes in the articles of association during the period and its reasons

No amendments were made to the Articles of Association of the Company between January 1, 2019 and December 31, 2019.

Information about the lawsuits filed against the company: There are lawsuits filed against the company. These lawsuits are not cases that may affect the Company's financial status and activities. Administrative or Judicial Sanctions Imposed on the Company and Members of the Management Body Due to Practices Against the Legislative Provisions

There are no administrative or judicial sanctions imposed on the company and members of the management body between 1 January 2019 and 31 December 2019 due to practices contrary to the provisions of the Legislation. Information on Donations Made During the Year In the 12-month period of 2019, a total of 3.865.148,31 TL aid and donation payments were made to public institutions and organizations, primarily educational institutions. General Assembly Information In 2019, the General Assembly was held on March 26, 2019, at the address of Sabancı Center 4.Levent / ISTANBUL with a quorum of 82.23% regarding the financial period of 2018. Announcement for invitation to the meeting was announced in the Turkish Trade Registry Gazette numbered 9777 on 28 February 2019. General Assembly Information Documents were presented to the shareholders on the Company website www.akcansa.com.tr three weeks before the meeting date. No agenda proposal was requested by the shareholders to be answered in writing. In the agenda of the meeting, there is an agenda item concerning an information item on donations made during the period and the determination of the donation and aid upper limit for the next financial period. At the Ordinary General Assembly Meeting held in 2019, all partners who wanted to speak were given the opportunity to speak and ask questions, and all questions were answered General Assembly Information (continued) by the Chairman of the General Assembly without any time limit. In accordance with the article 1.3.5 of the Corporate Governance Principles (II-17.1) of the CMB, the questions asked and answers given at the General Assembly meeting were announced to the public on the Company website. The minutes of the General Assembly, the List of Attendees to the Meeting and the Amendment of the Articles of Association are kept open to the shareholders at www.akcansa.com.tr. The Ordinary General Assembly held on 26.03.2019 was registered on 02.04.2019 and announced in the Trade Registry Gazette numbered 9804 on 08.4.2019.

No Extraordinary General Assembly meeting was held between 01 January 2019 and 31 December 2019.

Resolutions which are deemed to be significant as per Turkish Commercial Code are presented for the approval of shareholders at the General Assembly. Profit Distribution Depending on the legal status of the shareholders representing the capital of 191.447.068,25 TL from the 2018 profit, the transactions related to the distribution of a total of 152,774,760.47 (79,80% (gross) and 67,83% (net)) profit shares have been completed as of 29.03.2019. Activity Information As of the end of December 2019, our domestic consolidated sales turnover decreased by 20% compared to the same period of the previous year and became 1.110.6 million TL. Our consolidated international sales turnover realized as TL 702.5 million by increasing by 119%.


64

Financial Position

Condensed Financial Statements

Consolidated Statement of Financial Position 31 DECEMBER 2019 Current Assets 762,909,724 Fixed Assets 1,246,836,764 Total Assets 2,009,746,488 Short-Term Liabilities 649,159,854 Long-Term Liabilities 319,512,646 Total Liabilities 968,672,500 Equity 1,041,073,988

Total Equity 2,009,746,488

Consolidated Income Statement 31 DECEMBER 2019

Revenue 1,826,105,824 Cost of sales (-) (1,573,110,547)

Gross profit 252,995,277 Real Operating Profit 148,558,944 Operating profit before financial expense 219,191,347 Pre-tax profit from continuing operations 87,313,818 Profit for the period from continuing operations 74,968,766

Profit for the period 74,968,766

Operating Profitability 8,14% Profitability for the Period 4,11%


65

Financial Ratios (*)

LIQUIDITY RATIOS 31 DECEMBER 2019

Current Raito Current Assets/Short Term Liabilities 1.18 Acid Test Ratio (Current Assets - Inventories) / Short Term Liabilities 0.90 Inventories/Current Assets

Inventories/Current Assets 0.24

Working Capital Current Assets (excl. Cash and Cash Equivalents) - Short Term Liabilities (excl. Loans)

205,814,183

Financial Structure Ratios

Financial Leverage (Short Term + Long Term Liabilities)/Total Assets 0.48 Fixed Assets/Equity

1.20

Financial Liabilities/Equity

0.46

Net Financial Position

Cash and Cash Equivalents-Financial Liabilities (321,693,262)

Profitability Ratios

Asset Turnover Net Sales/Total Assets 0.91 Gross Profit Margin Gross Sales Margin/Net Sales 0.14 Return on Assets Net Profit/Total Assets 0.04 Operating Income/Sales

0.08

Net Earnings per Share

0.39

Cash and Cash Equivalents

152,041,813

Financial Liabilities

473,735,075 Net Financial Position

(321,693,262)

Trade Receivables 369.076.028 Other Receivables

64.395.708

Inventories

181.225.628 Trade Payables

(355.755.945)

Other Payables

(29.032.368) Net Operating Capital

229,909,051

(*) Obtained from consolidated financial table data. About the Affiliated Company Report issued under Article 199 of the Turkish Commercial Law Conclusion Part of the Affiliated Company Report; Pursuant to Article 199 of the Turkish Commercial Law No. 6102, conditions of widespread and regular product buying and selling transactions, which Akçansa goes into with Hacı Ömer Sabancı Holding A.Ş., HeidelbergCement AG, subsidiaries and the related organizations, have explained in relation to the market conditions by providing information on the methods and justification for the price determination. Concluded transactions are in compliance with precedents according to the stipulations regarding controlling companies in the related articles of the TCL No. 6102, and no losses have been incurred by joining the group companies.


66

Akçansa Board of Directors’ report dated January 29, 2019 report shows that in all of the transactions that Akçansa performed in 2018 with its controlling shareholders and their subsidiaries, it has completed all required legal transactions and has taken the necessary measures within the scope of the responsibilities put on the Board of Directors as per Article 199 of the TCC No. 6102.


67

AKÇANSA ÇİMENTO SANAYİ VE TİCARET A.Ş.

PROFIT DISTRIBUTION TABLE FOR THE YEAR 2019 (TL) 1. PAID-IN/ISSUED CAPITAL 191.447.068,25 TL 2. General Legal Reserve (based on legal records) 220.351.173,54 TL Information regarding privileges in profit distribution according to the Articles of Association, if any

None

According to CMB

According to Legal Records

Development Profit for the Period 87.313.818,00 TL 67.913.829,28 TL 4. Taxes (-) 12.345.052,00 TL 6.401.416,39 TL 5. Net Profit for the Period (=) 75.220.457,00 TL 61.512.412,89 TL 6. Retained Losses (-) 0,00 TL 0,00 TL 7. General Legal Reserve (-) 0,00 TL 0,00 TL 8. NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) 75.220.457,00 TL 61.512.412,89 TL 9. Donations Made within the Year (+) 3.865.148,31 TL 10. Net Distributable Current-Year Profit Including Donations 79.085.605,31 TL 11. First Dividend to the Shareholders 9.572.353,41 TL

- Cash 9.572.353,41 TL - Bonus 0,00 TL

- Total 9.572.353,41 TL 12. Dividends for Privileged Shareholders 0,00 TL 13. Dividends for Others 0,00 TL

- Executive Board Members, 0,00 TL - Employees, 0,00 TL - Other than Shareholders 0,00 TL

14. Dividends for Redeemed Shares 0,00 TL 15. Second Dividend to Shareholders 36.757.837,11 TL 16. General Legal Reserve 3.675.783,71 TL 17. Statutory Reserves 0,00 TL 18. Special Reserves 0,00 TL 27.785.160,11 TL 19. EXTRAORDINARY RESERVES 25.214.482,77 TL 0,00 TL 20. Other Sources for Distribution 0,00 TL 16.278.721,45 TL

- Retained Losses - Extraordinary Reserves 0,00 TL 16.278.721,45 TL - Other Reserves That Can Be Distributed According To

The Law And Articles Of Association


68

We would like to submit to the approval of the General Assembly the resolution taken by the Board of Directors on February 26, 2020 that; 2019 Annual Report be presented within the predetermined principles and guidelines at the Ordinary General Assembly to be convened on Tuesday, March 25, 2020; and that 75.220.457 TL of the consolidated period profit for 2019 of 87.313.818 TL to be distributed as follows as the Net Distributable Current-Year Profit after deducting the General Legal Reserves (1st Tier) and prior period losses, legal obligations and non-controlling interest as per Article 33 of the Articles of Association and in accordance with the CMB communiqués: First Dividend Share 9.572.353,41 TL Second Dividend Share 36.757.837,71 TL Total Gross Profit Share 46.330.190,52 TL General Legal Reserve (2nd Tier) 3.675.783,71 TL Extraordinary Reserve 25.214.482,77 TL

As a result of the profit distribution as per the principles mentioned above and based on our legal records drawn up in accordance with the Tax Procedure Law;

Concerning Gross net profit of 46.330.190,52 TL to be distributed to the shareholders: 16.278.721,45 TL of 30.051.469,07 TL net distributable profit of the period to be covered from Extraordinary Reserves,

27.785.160,12 TL of the net distributable profit of the period in our legal records obtained from the real estate sales in 2019 to be set aside as Special Reserves so as to take advantage of the corporate tax exemption stipulated in Article 5/1, sub-paragraph (e) of the Corporate Tax Law,

Hence, total dividends in the amount of 46.330.190,52 TL to be distributed for 2019 starting from March 26, 2020 to shareholders representing 191.447.068,25 TL in the capital at a ratio of %24,20 (gross) and %20,57 (net) depending

on their legal status.

Sincerely yours, Board of Directors

AKÇANSA ÇİMENTO SANAYİ VE TİCARET A.Ş. DIVIDEND RATES TABLE FOR THE YEAR 2019

TOTAL DIVIDENDS DISTRIBUTED

TOTAL DIVIDENDS DISTRIBUTED / NET

DISTRIBUTABLE PERIOD PROFIT

DIVIDEND CORRESPONDING TO SHARE WITH A

NOMINAL VALUE OF 1 TL

CASH (TL) BONUS (TL) RATE (%) AMOUNT (TL)

RATE (%)

GROSS 46.330.190,52 - 61,59% 0,242 24,20

NET* 39.380.661,94 - 52,35% 0,2057 20,57

* Net calculation is based on the assumption of 15% income tax withholding.

31

Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi and Its Subsidiary

Consolidated financial statements as ofDecember 31, 2019 and independent auditors’ report

69

(Convenience translation of the independent auditors’ report originally issued in Turkish)

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi

A) Report on the Audit of the Consolidated Financial Statements

1) Opinion

We have audited the consolidated financial statements of Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi and its subsidiary (hereafter together referred to as “Group”), which comprise the consolidated statement of financial position as at December 31, 2019, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2019, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the Turkish Financial Reporting Standards (TFRS). 2) Basis for Opinion

We conducted our audit in accordance with standards on auditing as issued by the Capital Markets Board of Turkey and Independent Auditing Standards (InAS) which are part of the Turkish Auditing Standards as issued by the Public Oversight Accounting and Auditing Standards Authority of Turkey (POA). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics for Independent Auditors (Code of Ethics) as issued by the POA, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 3) Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter

Goodwill impairment test

As at December 31, 2019, the Company has goodwill due to acquisitions which is approximately 6% of total assets. In accordance with TFRS, the Company performs an impairment test to assess whether the goodwill might be impaired. The assumptions, sensitivities and results of the tests performed are disclosed in note 12 of the financial statements. These tests are a key audit matter due to the complexity, the required estimates of management and the dependency on future market circumstances.

We involved our valuation specialists in our audit to support our assessment of the assumptions and methods that were used by the Company in testing the discount rates per cash generating unit and assessing the model that calculates future cash flows. Additionally, we tested expected growth rates and the related expected future cash flows. Furthermore we also inquired the appropriateness of the disclosures in the financial statements of the assumptions and the sensitivity and, inquired these information in relation to the importance according to the users of the financial statements.

70

(Convenience translation of the independent auditors’ report originally issued in Turkish)

Valuation of financial investments

The Company carries the financial investments it holds in its consolidated financial statements at fair value.

As of 31 December 2019, the Company has reflected its financial investments in the accompanying consolidated financial statements with the fair value of TL 159.966.650 as a result of its fair valuation study.

- Due to the importance of financial investments carried at fair value in terms of the accompanying consolidated financial statements and the use of significant forward-looking management estimates (discount rate and growth rate) in the valuation studies carried out, and the valuation of these forward-looking estimates involve uncertainties regarding the realization of key investments. has been determined as the subject.

In summary, the following audit procedures have been implemented for the audit of fair value calculation of financial investment items;

- In order to examine the valuation studies, the experts of another organization, which is included in the same audit network as our organization, are included in the audit team.

- The compatibility of the valuation studies with thefinancial statements and the mathematicalsuitability of the calculations used were checked.

- The valuation methods and the technical data used were evaluated with the support of our experts, by conducting interviews with the expert and the Community management.

- The expertise of those who carried out the valuationstudies has been evaluated in accordance withIAS 500.

The appropriateness of the prospective significantmanagement estimates (discount rate and growthrate) used in discounted cash flow modeling wereevaluated with our experts and sensitivity analyzeswere conducted. In addition, prospective revenueestimates used in the models were compared withthe financial results of the related companies in thepast year and the budgets for the upcoming years.

- Compliance of the explanations in the footnotes ofthe consolidated financial statements regardingfinancial investments with TFRS has beenchecked.

4) Responsibilities of Management and Those Charged with Governance for theConsolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with TFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

71

5) Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

In an independent audit, our responsibilities as the auditors are:

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with InAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with standards on auditing as issued by the Capital Markets Board of Turkey and InAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of “material misstatement” of the consolidated financial statements,whether due to fraud or error, design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.(The risk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal control.)

• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Group’s ability to continueas a going concern. If we conclude that a material uncertainty exists, we are required to drawattention in our auditor’s report to the related disclosures in the consolidated financialstatements or, if such disclosures are inadequate, to modify our opinion. Our conclusions arebased on the audit evidence obtained up to the date of our auditor’s report. However, futureevents or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financialstatements, including the disclosures, and whether the consolidated financial statementsrepresent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financialstatements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.

72

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

B) Report on Other Legal and Regulatory Requirements

1) Auditors’ report on Risk Management System and Committee prepared in accordance withparagraph 4 of Article 398 of Turkish Commercial Code (“TCC”) 6102 is submitted to the Boardof Directors of the Company on 18 February 2020.

2) In accordance with paragraph 4 of Article 402 of the TCC, no significant matter has come to ourattention that causes us to believe that the Company’s bookkeeping activities for the period 1January - 31 December 2020 and financial statements are not in compliance with laws andprovisions of the Company’s articles of association in relation to financial reporting.

3) In accordance with paragraph 4 of Article 402 of the TCC, the Board of Directors submitted to usthe necessary explanations and provided required documents within the context of audit.

The name of the engagement partner who supervised and concluded this audit is Cem Uçarlar.

Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited

Cem Uçarlar, SMMM Partner

20 February 2020 İstanbul, Türkiye

(Convenience translation of consolidated financial statements originally issued in Turkish)


Consolidated statement of financial position as at December 31, 2019 (Currency - Turkish Lira (TL))

(71)

Assets Notes Current period

(Audited) Prior period

(Audited) December 31, 2019 December 31,2018

Current assets

Cash and cash equivalents 4 152.041.813 275.421.213

Trade receivables 7 369.076.028 443.942.043

- Trade receivables from related parties 26,7 53.372.783 32.241.358 - Trade receivables from third parties 7 315.703.245 411.700.685

Other receivables 8 51.697.568 11.030.948

- Other receivables from related parties 26,8 131.105 240.479 - Other receivables from third parties 8 51.566.463 10.790.469

Inventories 9 181.225.628 244.939.954

Prepaid expenses 16 8.868.687 20.603.356

Other current assets - 30.495

Total current assets 762.909.724 995.968.009

Non-current assets Financial investments 5 159.966.650 140.844.587

Other receivables 8 3.829.453 2.959.286

- Other receivables from third parties 8 3.829.453 2.959.286 Property, plant and equipment 10 826.102.634 842.551.526

Intangible assets 11,12 172.585.673 175.391.221

- Goodwill 12 130.080.869 130.080.869 - Other intangible assets 11 42.504.804 45.310.352

Right of use assets 14 81.649.082 -

Prepaid expenses 16 1.615.967 1.786.802

Deferred tax assets 24 1.087.305 1.025.662

Total non-current assets 1.246.836.764 1.164.559.084

Total assets 2.009.746.488 2.160.527.093

The accompanying accounting policies and explanatory notes on pages 12 through 73 form an integral part of these consolidated financial statement



Consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2019 (Currency - Turkish Lira (TL))

(72)

Liabilities Notes Current period

(Audited) Prior period

(Audited) December 31,

2019 December 31,

2018

Current liabilities

Short-term borrowings 6 252.939.281 461.546.990

- Liabilities from financial loans 6 244.106.126 461.546.990

- Financial lease debts 6 8.833.155 -

Short-term portion of long-term financial liabilities 2.719.393 -

Trade payables 7 355.755.945 339.982.221

- Trade payables to related parties 26, 7 93.834.045 76.789.875 - Trade payables to third parties 7 261.921.900 263.192.346

Derivate financial instruments 13 - 19.766.287

Liabilities for employee benefits 8 8.712.867 7.371.698

Other payables 8 12.810.643 12.016.581

- Other payables to third parties 8 12.810.643 12.016.581 Deferred income 8 2.536.025 5.142.166

-Current income tax liabilities 24 4.611.524 4.293.754

Short-term provisions 13 9.074.176 14.630.722

- Provisions for short-term employee benefits 13 4.540.864 7.940.171

- Other short-term provisions 13 4.533.312 6.690.551

Total current liabilities 649.159.854 864.750.419

Non-current liabilities

Long-term borrowings 6 220.795.794 103.614.022 - Liabilities from financial loans 150.000.000 103.614.022

- Financial lease debts 70.795.794 -

Long-term provisions 13, 15 57.285.603 48.694.472

- Provisions for long-term employee benefits 15 52.852.264 45.914.636 - Other long-term provisions 13 4.433.339 2.779.836

Deferred tax liability 24 41.431.249 35.902.130

Total non-current liabilities 319.512.646 188.210.624 Total liabilities 968.672.500 1.052.961.043

Equity Equity attributable to parent 1.028.887.397 1.093.673.368 Paid-in share capital 17 191.447.068 191.447.068

Adjustments to share capital 233.177.582 233.177.582

Other comprehensive income/expense not to be reclassified to profit or loss

(23.223.675) (18.523.585)

Remeasurement gains/(losses) (23.223.675) (18.523.585) - Gain/(losses) on remeasurements of defined benefit plans (23.223.675) (18.523.585)

Other comprehensive income/expense to be reclassified to profit or loss

112.921.644 95.515.684

Remeasurement/Reclassification gains/(losses) 112.921.644 95.515.684 - Gain/(losses) on financial assets measured at fair value

through other comprehensive income112.921.644

95.515.684 Restricted reserves 268.702.218 243.290.154

Prior years’ income 170.642.103 170.869.425

Profit for the period 75.220.457 177.897.040

Non-controlling interests 12.186.591 13.892.682

Total equity 1.041.073.988 1.107.566.050

Total liabilities and equity 2.009.746.488 2.160.527.093

(Convenience translation of consolidated financial statements originally issued in Turkish) Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi Consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2019 (Currency - Turkish Lira (TL))

(73)

Current period (Audited)

Prior period

(Audited)

Notes January 1 – December 31,

2019

January 1 –

December 31,

2018

Continuing operations

Revenue 18 1.826.105.824 1.715.570.101

Cost of sales (-) 18 (1.573.110.547) (1.350.035.351)

Gross profit from business activities 252.995.277 365.534.750

Gross profit 252.995.277 365.534.750

General administrative expenses (-) 19,20 (82.462.345) (73.808.950)

Marketing expenses (-) 19,20 (23.328.261) (21.626.468)

Other operating income 21 35.522.356 44.172.203

Other operating expenses (-) 21 (34.168.083) (48.040.546)

Operating profit 148.558.944 266.230.989

Gains from investment activities ( net) 22 70.632.403 35.674.611

Losses from investment activities 22 - (10.609)

Operating profit before financial income/(expense) 219.191.347 301.894.991

Financial income 23 23.100.545 39.744.532

Financial expense (-) 23 (154.978.074) (119.889.486)

Profit before tax 87.313.818 221.750.037

Tax income/(expense) (12.345.052) (41.992.608)

- Current income tax expense 24 (6.807.220) (49.980.521)

- Deferred tax income/(expense) 24 (5.537.832) 7.987.913

Profit for the period from continuing operations 74.968.766 179.757.429 Profit for the period 74.968.766 179.757.429

Attributable to:

Non-controlling interests (251.691) 1.860.389

Equity holders of the parent 75.220.457 177.897.040

Earnings per share (Kr) 25 0,393 0,929

Earnings per share from continuing operations (Kr) 25 0,393 0,929

Weighted average number of shares 19.144.706.825 19.144.706.825 The accompanying accounting policies and explanatory notes on pages 12 through 73 form an integral part of these consolidated financial statement

(Convenience translation of consolidated financial statements originally issued in Turkish) Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi Consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2019 (Currency - Turkish Lira (TL))

(74)

Current period Prior period

(Audited) (Audited) Notes January 1 –

December 31, 2019 January 1 -

December 31, 2018 Profit for the period 74.968.766 179.757.429 Other comprehensive income/(expense): Items not to be reclassified to profit or loss (non-reclassified) (4.700.090) (2.570.324)

- Actuarial gains/(losses) arising from defined benefit plans (5.875.113) (3.212.905)

- Deferred tax income 24 1.175.023 642.581

Items to be reclassified to profit or loss (classified) 17.405.960 (80.889.381)

- Gain/(losses) on financial assets measured at fair value

through other comprehensive income

18.322.063 (85.146.717)

- Deferred tax income 24 (916.103) 4.257.336

Other comprehensive income/(expense) (after tax) 12.705.870 (83.459.705) Total comprehensive income 87.674.636 96.297.724 Attributable to: Non-controlling Interests (251.691) 1.860.389

Equity holders of the parent 87.926.327 94.437.335

The accompanying accounting policies and explanatory notes on pages 12 through 73 form an integral part of these consolidated financial statement

(Convenience translation of consolidated financial statements originally issued in Turkish) Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi Consolidated statement of changes in equity as of December 31, 2019 (Currency - Turkish Lira (TL))

(75)

Non-reclassified Reclassified Retained Earnings

Paid-in share

capital

Adjustment to

share capital

Gains/(losses)

on re-

measurement

of defined

benefit plans

Gains/(losses) on

financial assets

measured at fair

value through

other

comprehensive

income

Restricted

reserves

Prior years’

income

Profit

for the period

Equity holders

of the parent

Non-

controlling

interests

(Note 27)

Total

shareholders’

equity

Balance at January 1, 2018 191.447.068 233.177.582 (15.953.261) 176.405.065 222.598.194 170.869.220 148.693.675 1.127.237.543 12.032.293 1.139.269.836

Transfers - - - - 20.691.960 128.001.715 (148.693.675) - - - Total comprehensive income/(expense) - - (2.570.324) (80.889.381) - - 177.897.040 94.437.335 1.860.389 96.297.724 Profit for the period - - - - - - 177.897.040 177.897.040 1.860.389 179.757.429 Other comprehensive income/(expense) - - (2.570.324) (80.889.381) - - - (83.459.705) - (83.459.705) Dividends paid (Note 25) - - - - - (128.001.510) - (128.001.510) - (128.001.510) Balance at December 31, 2018 191.447.068 233.177.582 (18.523.585) 95.515.684 243.290.154 170.869.425 177.897.040 1.093.673.368 13.892.682 1.107.566.050

Balance at January 1, 2019 191.447.068 233.177.582 (18.523.585) 95.515.684 243.290.154 170.869.425 177.897.040 1.093.673.368 13.892.682 1.107.566.050 Transfers - - - - 25.412.064 152.484.976 (177.897.040) - - Total comprehensive income/(expense) - - (4.700.090) 17.405.960 - - 75.220.457 87.926.327 (251.691 ) 87.674.636 Profit for the period - - - - - - 75.220.457 75.220.457 (251.691 ) 74.968.766 Other comprehensive income/(expense) - - (4.700.090) 17.405.960 - - - 12.705.870 - 12.705.870 Dividends paid (Note 25) - - - - - (152.712.298) - (152.712.298) (1.454.400) (154.166.698) Balance at December 31, 2019 191.447.068 233.177.582 (23.223.675) 112.921.644 268.702.218 170.642.103 75.220.457 1.028.887.397 12.186.591 1.041.073.988

The accompanying accounting policies and explanatory notes on pages 12 through 73 form an integral part of these consolidated financial statements.

(Convenience translation of consolidated financial statements originally issued in Turkish) Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi Consolidated statement of cash flows for the year ended December 31, 2019 (Currency - Turkish Lira (TL))

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Current period Prior period (Audited) (Audited) Notes 1 January-

December 31, 2019

1 January- December 31,

2018 Cash flows from operating activities 350.922.064 276.596.335 Profit before tax 87.313.818 221.750.037 Profit before tax from continuing operations 87.313.818 221.750.037 Adjustment to reconcile profit before tax to cash generated from operating activities:

168.985.857 153.107.035

Depreciation and amortization 10, 11, 14 97.426.579 84.190.355 Adjustments for impairment loss/(reveral of impairment loss) 7.157.983 5.750.195 Impairment/(reversal of impairment) on receivables 7 4.721.983 3.571.951 Impairment/(reversal of impairment) on inventories 9 2.436.000 2.178.244 Adjustments for provisions 11.252.844 14.058.273 Provision for employee termination benefits 13, 15 9.090.930 11.181.119 Provision for litigation and/or penalties 13 508.411 1.591.508 Provision for recultivation 13 1.653.503 (1.475.381) Other provisions - 2.761.027 Adjustments for interest income and expenses 118.057.390 65.005.927 Interest income 23 (12.732.941) (18.812.076) Interest expense 15, 23 130.790.331 83.818.003 Loss/(gain) on sale of property, plant and equipment and intangible assets 22 (60.739.165) (22.025.627) Adjustments for other items arising from investing or financing activities 22 (9.893.237) (13.638.375) Adjustments for losses/(gains) arising from derivative financial instruments 5.723.463 19.766.287 Changes in working capital 116.222.664 (36.639.162) Adjustment related to(increase)/decrease In trade receivables 69.242.312 20.962.029 Adjustment related to(increase)/decrease In other receivables (40.666.620) (9.457.422) Adjustment related to(increase)/decrease In inventories 61.278.326 (96.163.883) Adjustment related to(increase)/decrease In prepaid expenses 11.905.504 (7.610.703) Adjustment related to(increase)/decrease In trade payables 15.773.724 52.497.729 Adjustment related to(increase)/decrease In employee benefit obligations 1.341.169 (654.128) Adjustment related to(increase)/decrease In other payables 794.062 (971.959) Adjustment related to(increase)/decrease In deffered revenue (2.606.141) 1.654.249 Other adjustments related to increase (decrease) in operating capital

(839.672) 3.104.926

Adjustment related to(increase)/decrease In other current assets (839.672) 3.104.926 Cash flows from operating activities 372.522.339 338.217.910 Employee termination benefits paid

13, 15 (14.081.897) (7.122.704)

Payments for other provisions (1.930.648) (467.802) Taxes paid (6.489.450) (54.500.269) Other cash inflows/(outflows) 7 901.720 469.200 Cash flows from investing activities 6.053.956 (37.489.900) Sale of property, plant and equipment and intangible assets 77.542.059 23.762.204 Purchase of property, plant and equipment and intangible assets 10 (80.581.340) (100.890.479) Dividends received 22 9.893.237 13.638.375 Cash inflows from sale of interest/capital decrease in financial assets 5 (800.000) 26.000.000 Cash flows from financing activities (480.355.420) (16.431.802) Cash inflows from short-term borrowings 6 667.672.857 529.790.843 Cash outflows from repayment of borrowings 6 (814.243.762) (373.000.000) Dividends paid 25 (154.166.698) (128.001.510) Interest paid (157.247.664) (60.897.792) Interest received 12.732.941 15.676.657 Financial Lease Payments 6 (18.316.447) - Paid Exchange Difference (16.786.647) - Net increase/(decrease) in cash and cash equivalents before the effect of foreign currency translation differences

(123.379.400)

222.674.633

Net increase in cash and cash equivalents (123.379.400) 222.674.633 Cash and cash equivalents at the beginning of the period

4 275.421.213 52.746.580

Cash and cash equivalents at the end of the period 4 152.041.813 275.421.213

The accompanying accounting policies and explanatory notes on pages 12 through 73 form an integral part of these consolidated financial statements.

(Convenience translation of consolidated financial statements originally issued in Turkish) Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi Notes to the consolidated financial statements as of December 31, 2019 (Currency - Turkish Lira (TL))

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1. Corporate information General Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi (Akçansa) was formed on September 30, 1996 through

the merger of Akçimento Ticaret Anonim Şirketi (Akçimento) which was established in 1967, with Çanakkale

Çimento Sanayi Anonim Şirketi (Çanakkale) which was established in 1974. At January 12, 1996,

Mortelmaattschappij Eindhoven B.V. (Mortel), which is a wholly owned subsidiary of Cimenteries CBR S.A.

(CBR), acquired 97,7% of Çanakkale. Subsequently on July 24, 1996, the CBR group exchanged its shares

in Çanakkale for 30% of the shares of Akçimento which was mainly owned by Hacı Ömer Sabancı Holding

Anonim Şirketi and its affiliates. Effective from October 1, 1996, Akçimento ceased its existence and merged with Çanakkale. The name of

Çanakkale was changed as Akçansa Çimento Sanayi ve Ticaret Anonim Şirketi. Akçansa shares have

been traded on the Borsa Istanbul A.Ş. (formerly Istanbul Stock Exchange) since 1986. On November 27,

2006, 39,72% shares of Akçansa Çimento Sanayi ve Ticaret A.Ş. owned by CBR International Holdings

B.V. which is 100% owned subsidiary of Heidelberg Cement A.G. has been transferred to Heidelberg

Cement Mediterranean Basin Holdings S.L. which is also 100% owned subsidiary of Heidelberg Cement

A.G. On March 1, 2017, 39,72% shares of Akçansa Çimento Sanayi ve Ticaret A.Ş. owned by Heidelberg

Cement Mediterranean Basin Holdings S.L has been transferred Heidelberg Cement A.G. .

The address of the headquarter and registered office is Palladium Tower Barbaros mah. Kardelen sk. , No:

2, Ataşehir, İstanbul.

The consolidated financial statements are authorized for issue by the management on February 20, 2020.

The General Assembly and certain regulatory bodies have the power to amend the statutory financial

statements after the issue. The major shareholders of the Company are Hacı Ömer Sabancı Holding AŞ

and Heidelberg Cement Mediterranean Basin Holdings S.L., as disclosed further in Note 17.

For the purpose of the consolidated financial statements, Akçansa and Karçimsa Çimento Sanayi ve Ticaret

A.Ş. (Karçimsa – 50,99% owned subsidiary of Akçansa) - together are referred to as “Akçansa and its

subsidiary” or “the Company”. As of December 31, 2019 and December 31, 2018, the number of personnel

(all employed in Turkey) is 987 and 1.094, respectively.

Nature of activities

The Company is primarily engaged in manufacturing of cement, clinker, ready mixed concrete and

aggregate.


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2. Basis of preparation of financial statements

2.1 Basis of preparation The Company and its Turkish subsidiary Karçimsa maintain their books of account and prepare their

statutory financial statements in accordance with accounting principles in the Turkish Commercial Code

and tax legislation.

The accompanying consolidated financial statements have been prepared in accordance with the Turkish

Accounting Standards (“TAS”) promulgated by the Public Oversight Accounting and Auditing Standards

Authority (“POA”) in compliance with the communiqué numbered II-14.1 “Communiqué on the Principles of

Financial Reporting In Capital Markets” (the Communiqué) announced by the Capital Markets Board

(“CMB”) on 13 June 2013 which is published on Official Gazette numbered 28676. TAS consists of the

Turkish Accounting Standards, Turkish Financial Reporting Standards and related supplements and

interpretations.

The consolidated financial statements are based on the statutory records with the required adjustments

and reclassifications reflected for the purpose of fair presentation in accordance with the Turkish Financial

Reporting Standards as adopted by POA. These adjustments and reclassifications mainly consist of the

effect of deferred tax calculation, retirement pay liability, prorate depreciation of property and equipment

with useful life assessed by the management, accounting for provisions, the fair value accounting of

financial assets available for sale and discounting of trade receivables and payables. Functional and presentation currency Functional and presentation currency of the Company is Turkish Lira (TL). Based on the decision of CMB dated March 17, 2005 and numbered 11/367, since the objective conditions

for the restatement in hyperinflationary economies was no longer available at that time, Turkey came off

hyperinflationary status and the financial statements were only restated until December 31, 2004 in

accordance with TAS 29 (“Financial Reporting in Hyperinflationary Economies”). Therefore, non-monetary

assets and liabilities and components of shareholders’ equity including share capital reported in the balance

sheet as of December 31, 2018 and December 31, 2017 are derived by indexing the additions occurred

until December 31, 2004 to December 31, 2004 and carrying the additions after this date with their nominal

amounts. 2.2. New and revised Turkish financial reporting standards The new and revised standards and interpretations The accounting policies adopted in preparation of the consolidated financial statements as at

December 31, 2019 are consistent with those of the previous financial year, except for the adoption of new

and amended TFRS and TFRIC interpretations effective as of January 1, 2019. The effects of these

standards and interpretations on the Company’s financial position and performance have been disclosed

in the related paragraphs.


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2. Basis of preparation of financial statements (continued)

2.2. New and revised Turkish financial reporting standards (continued) i) New standards, amendments and interpretations effective from January 1, 2019 TFRS 16 Leases In April 2018, POA has published a new standard, TFRS 16 'Leases'. The new standard brings most leases

on-statement of financial position for lessees under a single model, eliminating the distinction between

operating and finance leases. Lessor accounting however remains largely unchanged and the distinction

between operating and finance leases is retained. TFRS 16 supersedes TAS 17 'Leases' and related

interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption

permitted.

Lessees have recognition exemptions to applying this standard in case of short-term leases (i.e., leases

with a lease term of 12 months or less) and leases of ’low-value’ assets (e.g., personal computers, office

equipment, etc.). At the commencement date of a lease, a lessee measures the lease liability at the present

value of the lease payments that are not paid at that date (i.e., the lease liability), at the same date

recognises an asset representing the right to use the underlying asset (i.e., the right of use asset) and

depreciates it during the lease term. The lease payments shall be discounted using the interest rate implicit

in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall

use the lessee’s incremental borrowing rate. Lessees are required to recognise the interest expense on the

lease liability and the depreciation expense on the right of use asset separately.

Lessees are required to remeasure the lease liability upon the occurrence of certain events (e.g. a change

in the lease term, a change in future lease payments resulting from a change in an index or rate used to

determine those payments). Under these circumstances, the lessee recognises the amount of the

remeasurement of the lease liability as an adjustment to the right of use asset.

Transition to TFRS 16:

The Group adopted TFRS 16 using the modified retrospective approach. The Group elected to apply the

standard to contracts that were previously identified as leases applying TAS 17 and TFRIC 4. The Group

therefore did not apply the standard to contracts that were not previously identified as containing a lease

applying TAS 17 and TFRIC 4.

The Group elected to use the exemptions applicable to the standard on lease contracts for which the lease

terms ends within 12 months as of the date of initial application and lease contracts for which the underlying

asset is of low value. On the date the lease actually starts, the tenant measures the lease obligation at the

present value of the lease payments that were not paid at that date (the lease obligation), and as of that

same date, subordinates the lease for the duration of the lease. Rent payments are discounted using this

rate if the implicit interest rate in the lease can be easily determined. If the tenant cannot easily determine

this rate, the tenant uses the alternative borrowing interest rate. The tenant must record the interest

expense on the lease obligation and the depreciation expense of the right to use asset separately.

The tenant re-measures the lease obligation if certain events occur (for example, changes in lease

duration, forward lease payments due to changes in a particular index or rate, etc.). In this case, the

tenant records the reassignment effect of the lease obligation as a correction on the right of use.


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2.2. New and revised Turkish financial reporting standards (continued) i) New standards, amendments and interpretations effective from January 1, 2019 Effects on the statement of financial position of 1 January 2019 (increase / (decrease):

Assets Property, plant and equipment (right of use) 69.685.740

Prepaid expenses (8.611.328)

Resources Rental obligation 61.074.412

The standard is applied for annual periods beginning on or after January 1, 2019. The effects of the

mentioned standard on the Company's financial status and performance are explained in Note 14.

Summary of new accounting policies

The following are the new accounting policies on the Company's implementation of TFRS 16:

Right of use assets The Company accounts for its rights-to-use assets on the date the financial lease contract commences (for

example, as of the date the relevant asset is available for use). The right of use assets are calculated by

deducting the accumulated depreciation and impairment losses from the cost value. In case the financial

leasing debts are revalued, this figure is corrected.

The cost of the right of use asset includes:

(a) the first measurement of the lease obligation,

(b) the amount obtained from all rental payments made before or before the lease actually starts, by

deducting all rental incentives received, and

(c) All initial costs incurred by the company.

Unless the transfer of the ownership of the underlying asset to the Company at the end of the lease is

reasonably finalized, the Company depreciates its asset right to use until the end of the useful life of the

underlying asset.

Right of use assets are subject to impairment assessment.

Lease Obligations

The company measures the lease obligation at the present value of the lease payments, which were not

paid on the date the lease actually began.

The lease payments included in the measurement of the lease obligation at the date of the lease actually

consist of the following payments to be made for the right of use of the underlying asset during the lease

period and not paid at the date when the lease actually started:

(a) Fixed payments,

(bVariable rental payments based on an index or rate, made using an index or rate at the date when the

first measurement was actually started.

(c) Amounts expected to be paid by the Company within the scope of residual value commitments


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2.2. New and revised Turkish financial reporting standards (continued) i) New standards, amendments and interpretations effective from January 1, 2019

(d) If the Company is reasonably sure that it will use the purchase option, the price of use of this option

and

(e) If the rental period shows that the Company / Group will use an option to terminate the lease,

penalties for termination of the lease. Variable lease payments that do not depend on an index or rate are recorded as expenses in the period

when the event or condition that triggered the payment occurred. In case the revised discount rate and the implicit interest rate in the lease can be easily determined for the

remainder of the company lease period, this rate is; In case it cannot be determined easily, the Company

determines the alternative borrowing interest rate on the date of re-evaluation. The company measures the lease obligation after the lease actually starts as follows:

(a) Increases the carrying value to reflect the interest on the lease obligation, and

(b) It reduces the carrying value to reflect the rent payments made. In addition, in the event that there is a change in lease duration, a change in substance of fixed lease

payments or a change in the assessment of the option to purchase an underlying asset, the value of

financial lease liabilities is re-measured.

Short-term leases and low-value leases The company applies its short-term lease registration exemption to short-term machinery and equipment

lease contracts (i.e. assets with a lease period of 12 months or less from the start date and without a

purchase option). It also applies the exemption of accounting for low-value assets to office equipment, the

rental value of which is considered to be low-value. Short term lease contracts and lease contracts of low

value assets are recorded as expense according to the linear method during the lease period.

Important assumptions and estimates for options to extend or terminate rentals:

The lease obligation is determined by considering the extension and early termination options in the

contracts. Most of the extension and early termination options included in the contracts consist of options

that are jointly applicable by the Company and the lessor. The Company determines the rental period by

including the extension and early termination options in the Company's initiative according to the relevant

contract and if the options are reasonably accurate, it is included in the rental period. If the conditions

change significantly, the assessment is reviewed by the Company.

Amendments to TAS 28 “Investments in Associates and Joint Ventures” (Amendments) In December 2017, POA issued amendments to TAS 28 Investments in Associates and Joint Ventures.

The amendments clarify that a company applies TFRS 9 Financial Instruments to long-term interests in an

associate or joint venture that form part of the net investment in the associate or joint venture.

TFRS 9 Financial Instruments excludes interests in associates and joint ventures accounted for in

accordance with TAS 28 Investments in Associates and Joint Ventures. In this amendment, POA clarified

that the exclusion in TFRS 9 applies only to interests a company accounts for using the equity method. A

company applies TFRS 9 to other interests in associates and joint ventures, including long-term interests

to which the equity method is not applied and that, in substance, form part of the net investment in those

associates and joint ventures.


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2.2. New and revised Turkish financial reporting standards (continued) i) New standards, amendments and interpretations effective from January 1, 2019 The amendment is applied for annual periods beginning on or after January 1, 2019. The amendment

does not apply to the Company.

TFRIC 23 Uncertainty over Income Tax Treatments The interpretation clarifies how to apply the recognition and measurement requirements in “TAS 12 Income

Taxes” when there is uncertainty over income tax treatments.

When there is uncertainty over income tax treatments, the interpretation addresses:

(a) whether an entity considers uncertain tax treatments separately;

(b) the assumptions an entity makes about the examination of tax treatments by taxation authorities;

(c) how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits

and tax rates; and

(d) how an entity considers changes in facts and circumstances.

These amendments are applied for annual periods beginning on or after 1 January 2019. The amendments

did not have a significant impact on the financial position or performance of the Group.

Annual Improvements – 2015–2017 Cycle In January 2019, POA issued Annual Improvements to TFRS Standards 2015–2017 Cycle, amending the

following standards:

• TFRS 3 Business Combinations and TFRS 11 Joint Arrangements — The amendments to TFRS 3 clarify

that when an entity obtains control of a business that is a joint operation, it remeasures previously held

interests in that business. The amendments to TFRS 11 clarify that when an entity obtains joint control of

a business that is a joint operation, the entity does not remeasure previously held interests in that business.

• TAS 12 Income Taxes — The amendments clarify that all income tax consequences of dividends (i.e.

distribution of profits) should be recognised in profit or loss, regardless of how the tax arises.

• TAS 23 Borrowing Costs — The amendments clarify that if any specific borrowing remains outstanding

after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that

an entity borrows generally when calculating the capitalisation rate on general borrowings.




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2.2. New and revised Turkish financial reporting standards (continued)

i) New standards, amendments and interpretations effective from January 1, 2019 (continued) (continued) Plan Amendment, Curtailment or Settlement” (Amendments to TAS 19) In January 2019, the POA published Amendments to TAS 19 “Plan Amendment, Curtailment or Settlement”

The amendments require entities to use updated actuarial assumptions to determine current service cost

and net interest for the remainder of the annual reporting period after a plan amendment, curtailment or

settlement occurs. The amendment is effective from annual periods beginning on or after January 1,2019.



Prepayment Features with Negative Compensation (Amendments to TFRS 9)

The POA issued minor amendments to TFRS 9 Financial Instruments to enable companies to measure

some prepayable financial assets at amortised cost. Applying TFRS 9, a company would measure a

financial asset with so-called negative compensation at fair value through profit or loss. Applying the

amendments, if a specific condition is met, entities will be able to measure at amortised cost some

prepayable financial assets with so-called negative compensation.

The amendments are effective from annual periods beginning on or after 1 January 2019, with early

application permitted. The Company is in the process of assessing the impact of the interpretation on

financial position or performance of the Company.

ii) Standards issued but not yet effective and not early adopted

Standards, interpretations and amendments to existing standards that are issued but not yet effective up

to the date of issuance of the interim consolidated financial statements are as follows. The Group will

make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial

statements and disclosures, when the new standards and interpretations become effective.

TFRS 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments) In December 2017, POA postponed the effective date of this amendment indefinitely pending the outcome

of its research project on the equity method of accounting. Early application of the amendments is still

permitted. The Group will wait until the final amendment to assess the impacts of the changes.


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2. Basis of preparation of financial statements (continued) 2.2. New and revised Turkish financial reporting standards (continued) ii) Standards issued but not yet effective and not early adopted (continued)

TFRS 17 - The new Standard for insurance contracts The IASB issued TFRS 17, a comprehensive new accounting standard for insurance contracts covering

recognition and measurement, presentation and disclosure. TFRS 17 model combines a current balance

sheet measurement of insurance contract liabilities with the recognition of profit over the period that services

are provided. Certain changes in the estimates of future cash flows and the risk adjustment are also

recognised over the period that services are provided. Entities will have an option to present the effect of

changes in discount rates either in profit and loss or in OCI. The standard includes specific guidance on

measurement and presentation for insurance contracts with participation features. TFRS 17 will become

effective for annual reporting periods beginning on or after 1 January 2021; early application is permitted. The standard is not applicable for the Company and will not have an impact on the financial position or

performance of the Company.

Definition of a Business (Amendments to TFRS 3) In May 2019, the PAO issued amendments to the definition of a business in TFRS 3 Business

Combinations. The amendments are intended to assist entities to determine whether a transaction should

be accounted for as a business combination or as an asset acquisition. The amendments:

- clarify the minimum requirements for a business;

- remove the assessment of whether market participants are capable of replacing any missing

elements;

- add guidance to help entities assess whether an acquired process is substantive;

- narrow the definitions of a business and of outputs; and

- introduce an optional fair value concentration test. The amendments to TFRS 3 are effective for annual reporting periods beginning on or after January 1,2020

and apply prospectively. Earlier application is permitted. The standard is not applicable for the Company

and will not have an impact on the financial position or performance of the Company.

Definition of Material (Amendments to TAS 1 and TAS 8)

In June 2019, the PAO issued amendments to TAS 1 Presentation of Financial Statements and TAS 8

Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across

the standards and to clarify certain aspects of the definition. The new definition states that, ’Information is

material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the

primary users of general purpose financial statements make on the basis of those financial statements,

which provide financial information about a specific reporting entity. The amendments clarify that materiality

will depend on the nature or magnitude of information, or both. An entity will need to assess whether the

information, either individually or in combination with other information, is material in the context of the

financial statements.

The amendments to TAS 1 and TAS 8 are required to be applied for annual periods beginning on or after

January 1,2020.

The amendments must be applied prospectively and earlier application is permitted. The amendments are

not applicable for the Company and will not have an impact on the financial position or performance of the

Company.


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2. Basis of preparation of financial statements (continued) 2.2. New and revised Turkish financial reporting standards (continued) ii) Standards issued but not yet effective and not early adopted (continued) Changes in TFRS 9, TAS 39 and TFRS 7 - Indicator Interest Rate Reform

Facilitating implementations were provided in TFRS 9 and TAS 39 regarding indicator interest rate reform

in the annual reporting periods starting on or after 1 January 2020. These applications are related to

hedge accounting and are briefly

- Provision regarding the high probability of transactions,

- Forward looking evaluations,

- Retrospective assessments and

- They are separately identifiable risk components.

The exemptions applied to the amendment to TFRS 9 and TAS 39 are intended to be disclosed in the

financial statements in accordance with the regulation in TFRS 7.

The company does not expect a significant impact on the balance sheet and equity in general.

iii) New and revised standards and interpretations published by the International Accounting Standards Board (IASB) but not published by Public Oversight Authority (POA) Amendments to IAS 1- Classification of Liabilities as Current and Non-Current Liabilities

On January 23, 2020, IASB made amendments to the “Presentation of IAS 1 Financial

Statements”standard. These amendments, which are effective for annual reporting periods starting on or

after 1 January 2022, provide explanations to the criteria for the long and short term classification of

liabilities. The changes should be applied retrospectively in accordance with IAS 8 “Accounting Policies,

Changes and Errors in Accounting Estimates”. Early application is allowed.

The effects of this change on the financial position and performance of the Company are evaluated.


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2. Basis of preparation of financial statements (continued) 2.3. Significant accounting judgments, estimates and assumptions

a) Reserve for retirement pay liability is determined by using actuarial assumptions such as

discount rates, future salary increase and employee’s turnover rates. The estimations

include significant uncertainties due to their long term nature. The details about reserve for

employee benefits are provided in Note 15.

b) Provision for doubtful receivables is an estimated amount that management believes to

reflect possible future losses on existing receivables that have collection risk due to current

economic conditions. During the impairment test for the receivables, the debtors, other

than the key accounts and related parties, are assessed with their prior year performances,

their credit risk in the current market, their performance after the balance sheet date up to

the issuing date of the financial statements; and also the renegotiation conditions with

these debtors are considered. The provision for doubtful receivables is mentioned in the

Note 7.

c) The Company has made certain important assumptions based on experiences of technical

personnel in determining useful economic life of mainly related to tangible and intangible

assets (Note 10 and 11).

d) In determining of provision for litigations, the Company considers the probability of legal

cases to be resulted against the Company and in case it is resulted against the Company

considers its consequences based on the assessments of legal advisor. The Company

management makes its best estimates using the available data are provided in Note 13.

e) During the assessment of the reserve for obsolete inventories, inventories are physically

and historically analyzed, usefulness of the inventories are determined based on the view

of the technical personnel and if it is necessary, allowance is booked. Sales prices listed,

average discount rates given for sale and expected cost incurred to sell are used to

determine the net realizable value of the inventories. As a result of this, the inventories with

the net realizable values below the costs are written down as disclosed in the Note 9.

f) The Company performs its impairment analysis on assets by using discounted cash flows.

In these analyses, there are certain assumptions about discount rates used and

Company’s future operations. (Note 12, Note 5).

g) The Company makes assumptions based on views of the technical personnel in the

calculation of provision for recultivation of exploitation lands. As a result of these analyses,

assessments of the provision for recultivation of exploitation lands are provided in Note 13.


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2. Basis of presentation of financial statements (continued) 2.4 Summary of significant accounting policies Basis of consolidation The consolidated financial statements comprise the financial statements of Akçansa and Karçimsa in which

Akçansa has a shareholding interest of 50,99%. Subsidiary is consolidated from the date on which control

is transferred to Akçansa until the date on which the control is transferred out of Akçansa.

As stated above, the consolidated financial statements consist of the financial statements of Akçansa and

its subsidiary which it controls. The control is available if and only if all of the following indicators of the

investment properties are present in more than one condition; a) power over an investee, b) exposure, or

rights, to variable returns from its involvement with the investee c) the ability to use its power over the

investee to affect the amount of the investor's return

The subsidiary is consolidated by using full consolidation method, accordingly the registered subsidiary

values are netted off with the related equity items. The equity and net income attributable to non-controlling

shareholders’ are shown as non-controlling interest in consolidated balance sheet and income statement.

The results of subsidiaries acquired or disposed during the year are included in consolidated

comprehensive income statement after the acquisition date or until the disposal date. Total comprehensive

income is transferred to equity holders of the parent and non- controlling interests even if the non-controlling

interests result in reverse balance.

Balances and transactions between Akçansa and its subsidiary, including intercompany profits and

unrealized profits and losses are eliminated. Consolidated financial statements are prepared using uniform

accounting policies for transactions and other events in similar circumstances.

Changes in the Company's ownership interests in subsidiary that do not result in the Company losing control

over the subsidiary are accounted for as equity transactions. The carrying amounts of the Company's

interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in

the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted

and the fair value of the consideration paid or received is recognized directly in equity and attributed to

owners of the Company.

When the Company loses control of a subsidiary, the profit or loss on disposal is calculated as the difference

between (i) the aggregate of the fair value of the consideration received and the fair value of any retained

interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the

subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts

or fair values and the related cumulative gain or loss has been recognized in other comprehensive income

and accumulated in equity, the amounts previously recognized in other comprehensive income and

accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets

(i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable

TFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost

is accounted for in accordance with TFRS 9.

Offsetting

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is

a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net

basis or realize the asset and settle the liabilities simultaneously.


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2. Basis of presentation of financial statements (continued) 2.4 Summary of significant accounting policies (continued) Cash and cash equivalents

For the purposes of the presentation of consolidated cash flow statement, cash and cash equivalents

comprise cash on hand, cash in banks, checks readily convertible to known amounts of cash and short-

term deposits with an original maturity of three months or less.

Cash and cash equivalents are carried at cost plus interest income accrual.

Inventories Inventories are valued at the lower of cost or net realizable value. Costs incurred in bringing each product

to its present location and conditions are accounted for as follows:

Raw materials - purchase cost on a monthly average basis.

Finished goods and work-in-process - cost includes direct material and labor cost, the applicable allocation

of fixed and variable overhead costs (considering normal operating capacity) on the basis of monthly

average basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs

of completion and estimated costs necessary to make the sale.

Property, plant and equipment The initial cost of property, plant and equipment comprises its purchase price and non-refundable purchase

taxes and any directly attributable costs of bringing the asset to its working condition and location for its

intended use.

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in

value. Land is not subject to depreciation except for the exploitation land. Exploitation land is depreciated

based on the ratio of depletion of mining reserves to total reserves.

Assets under construction that are held for rental or any other administrative or undefined purposes are

carried at cost less any impairment loss, if any. Legal fees are also included in cost. Borrowing costs are

capitalized for assets that need substantial time to prepare the asset for its intended use or sale. As the

similar depreciation method used for other fixed assets, depreciation of such assets begins when they are

available for use.

Depreciation is calculated on all property, plant and equipment on a straight-line basis over the estimated

useful life of the asset as below. Useful Life

Land improvements and buildings 20-50 years

Machinery and equipment 5-20 years

Furniture and fixtures 5-10 years

Motor vehicles 5 years

Leasehold Improvements 5-47 years


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2. Basis of presentation of financial statements (continued) 2.4 Summary of significant accounting policies (continued)

Property, plant and equipment (continued)

An item of property, plant and equipment is derecognized upon disposal or when no future economic

benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal

or retirement of an item of property, plant and equipment is determined as the difference between the sales

proceeds and the carrying amount of the asset and is recognized in profit or loss.

An item of property, plant and equipment is derecognized from statement of financial position (balance

sheet) upon disposal or when no future economic benefits are expected to arise from the continued use of

the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment

is determined as the difference between the sales proceeds and the carrying amount of the asset and is

recognized in profit or loss

Intangible assets

Intangible assets which mainly comprise of software and mining rights are measured at cost. Intangible

assets are amortized on a straight line basis over the best estimate of their useful lives, excluding mining

rights. Mining rights are amortized based on the ratio of depletion of mining reserves to total reserves. The carrying values of intangible assets are reviewed for impairment when there is any event or changes

in circumstances indicate that the carrying value may not be recoverable.

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from

use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the

difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in

profit or loss when the asset is derecognized.

Goodwill

Any excess of the acquirer’s interest over the net fair value of the acquiree’s identifiable assets, liabilities

and contingent liabilities over the business combination cost is accounted for as goodwill. In accordance with TFRS 3 “Business Combinations”, the Company does not amortize goodwill, but the

goodwill arising from acquisitions is reviewed for impairment annually or more frequently if events or

changes in circumstances indicate that the carrying value may be impaired.


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2. Basis of presentation of financial statements (continued) 2.4 Summary of significant accounting policies (continued) Impairment of non-financial assets At each balance sheet date, the Company assesses whether there is any indication that book value of

tangible and intangible assets, calculated by acquisition cost less accumulative amortization, is impaired.

When an indication of impairment exists, the Company estimates the recoverable amount of such assets.

When individual recoverable value of assets cannot be measured, recoverable value of cash generating

unit of that asset is measured. Recoverable amount is the higher of value in use or fair value less costs to sell. Value in use is the present

value of the future cash flows expected to be derived from an asset or cash-generating unit by using

discount rates before taxes that reflects risks related with that asset. The main estimates that are used

during these analyses comprise expected inflation rates, expected increase in sales and cost of sales,

expected changes in export-domestic market composition and expected growth rate of the country. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying

amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An

impairment loss is recognized immediately in the consolidated statement of income. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit)

is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount

does not exceed the carrying amount that would have been determined had no impairment loss been

recognized for the asset (cash-generating unit) in prior years. Impairment loss cannot be reversed in the

consolidated statement of income in future periods for goodwill.

Foreign currency transactions

Transactions in foreign currencies are translated to TL by the exchange rate ruling at the date of the

transaction. Monetary assets and liabilities denominated in foreign currencies as of December 31, 2018 are

translated at the Central Bank buying rate of exchange ruling at the balance sheet date. The foreign

currency income or expenses incurred from the translation of foreign currency denominated transaction is

reflected within the statement of income in the related period.

Foreign currency translation rates used by the Company as of respective year-ends are as follows:

Date TL/USD TL/EUR Buying rates

December 31, 2019 5,9402 6,6506

December 31, 2018 5,2609 6,0280

Provisions, contingent assets and liabilities Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of

a past event, it is probable that an outflow of resources embodying economic benefits will be required to

settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the

time value of money is material, provisions are determined by discounting the expected future cash flows

at a pre-tax rate that reflects current market assessments of the time value of money and, where

appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due

to the passage of time is recognized as an interest expense.


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2. Basis of presentation of financial statements (continued) 2.4 Summary of significant accounting policies (continued) Contingent assets and liabilities Contingent liabilities are not recognized in the financial statements, but are disclosed unless the possibility

of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognized in

the financial statements, but disclosed when an inflow of economic benefits is probable.

Income tax

Tax expense (income) is the aggregate amount included in the determination of net profit or loss for the period

in respect of current and deferred tax.

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet

date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences.

Deferred tax assets are recognized for all deductible temporary differences and unused tax losses, to the

extent that it is probable that taxable profit will be available against which the deductible temporary differences

and unused tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each

balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be

available to allow all or part of the deferred income tax asset to be utilized.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the

period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been

enacted or substantively enacted at the balance sheet date.

Employee benefits/ retirement pay liability/vacation pay liability

(a) Defined benefit plan: In accordance with existing social legislation in Turkey, the Company is required to make lump-sum

termination indemnities to each employee who has completed over one year of service with the Company

and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. As indicated in Note 15 in detail, in the accompanying financial statements, the Company has reflected a

liability using the “Projected Unit Credit Method” based on the actuarial valuation performed by independent

actuaries. The employee termination benefits are discounted to the present value of the estimated future

cash outflows using the interest rate estimate of qualified actuaries.

In the consolidated balance sheets, employee termination benefits are reflected under non-current liabilities

as provisions for long term employee benefits.

(b) Defined contribution plans: The Company pays contributions to the Social Security Institution of Turkey on a mandatory basis. The

Company has no further payment obligations once the contributions have been paid. The contributions are

recognized as employee benefit expense when they are due. There are contributions amounting to TL

14.614.076 as of December 31, 2019 (December 31, 2018 – TL 12.803.419).


(92)

2. Basis of presentation of financial statements (continued) 2.4 Summary of significant accounting policies (continued) Defined contribution plans(continued):

(a) Provision for unused vacation: The short term benefits provided to employees comprise the ones which are expected to be settled wholly

in twelve months after the end of the reporting period. The Company classifies unused vacation provision

in provisions for short term employee benefits since the expectation is the settlement in the following twelve

months after the reporting period.

Leases The Group has applied TFRS 16 as of January 1,2019. Accounting policies applied prior to January 1,2019

are explained in detail in the notes to the consolidated financial statements as of December 31, 2018.

a) Companys – as lessee

At inception of a contract, the Group assesses whether a contract is, or contains a lease. A contract is, or

contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time

in exchange for consideration.Group recognises a right-of-use asset and a lease liability at the

commencement date of the lease following the above mentoned assessments.

b) Group – as a lessor All the leases that Group is the lessor are operating leases. Assets leased out under operating leases are

classified under investment properties or operating leases in the consolidated financial position. Rental

income is recognised in the consolidated statement of income on a straight-line basis over the lease term.

Related parties

Parties are considered related to the Company if;

a) A person or a close member of that person's family is related to a reporting entity if that person:

(i) has control or joint control over the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of the key management personnel of the reporting entity or of a parent of the

reporting entity.

(b) The entity and the reporting entity are members of the same group (which means that each parent,

subsidiary and fellow subsidiary is related to the others).

(i) The entity and the company are members of the same group.

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a

member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.


(93)


Related parties(continued):

v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting

entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the

sponsoring employers are also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key

management personnel of the entity (or of a parent of the entity).

A related party transaction is a transfer of resources, services or obligations between related parties,

regardless of whether a price is charged.

Revenue recognition

The Company transfers the committed goods or services to its customers and takes the revenue to the

consolidated financial statements when it fulfills the performance obligation. When an asset is taken by

the customer, the asset is transferred.

In accordance with the following five basic principles, the Company proceeds to the financial statements:

• Determination of customer contracts,

• Determination of performance obligations in contracts,

• Determining the transaction price in contracts,

• Distribution of the transaction price to the performance obligations in the contracts,

• Revenue recognition when each performance obligation is done.

The Company recognizes a contract with its customer as revenue when all of the following conditions are

met:

The parties of the agreement have confirmed the contract (in accordance with written, oral or other

commercial practices) and undertakes to carry out their own actions,

• The Company may define the rights of each party related to the goods or services to be transferred,

• The Company can define the payment terms for the goods or services to be transferred,

• The contract is essentially commercial,

• The Company is likely to incur prices for the goods or services to be transferred to the customer.

The Company considers whether the collectability of a price is probable or not, and it considers only the

ability of the customer to pay the price at the due date and its intention. At the beginning of the contract,

the Company evaluates the goods or services it has committed in the contract with the customer and

defines each commitment to transfer it to the customer as a performance obligation.


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Revenue recognition(continued):

At the beginning of the contract, the Company evaluates the goods or services it commits on the contract

with the customer and defines each commitment to transfer it to the customer as performance obligations

as follows:

a)Different goods or services (goods or services package) or

b) A series of different goods or services that are substantially similar and which are followed by the same

A series of goods or services are subject to the same cycle if the following conditions are met:

a) The Group commits to transfer the goods to each customer in a series of different goods or services that

meet the necessary conditions to be completed over time with a performance obligation

b) In accordance with the relevant paragraphs of the standard, use of the same method in order to measure

the progress of the Group for the performance of the obligation of each of the different goods or services

constituting the series.

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that

necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as

part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur.

Amortized cost is calculated by taking into account any issue costs and any discount or premium on

settlement. Earnings per share

Basic earnings per share is calculated by dividing the net profit for the period by the weighted average

number of ordinary shares outstanding during the period.

In Turkey, companies can increase their share capital by making distribution of free shares to existing

shareholders from various internal resources. For the purpose of the EPS calculation such share issues

are regarded as issued stock. Accordingly the weighted average number of shares used in EPS calculation

is derived by giving retroactive effect to the issue of such shares.

Subsequent events

Post period-end events that provide additional information about the Company’s position at the balance

sheet date (adjusting events), are reflected in the financial statements. Post-period-end events that are not

adjusting events are disclosed in the notes when material.

Trade and settlement date accounting All "regular way" purchases and sales of financial assets are recognized on the trade date, in other words,

the date the Company commits to purchase the asset. Regular way purchases or sales are purchases or

sales of financial assets that require delivery of assets within the time frame generally established by

regulation or convention in the market place.


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2. Basis of presentation of financial statements (continued) 2.4 Summary of significant accounting policies (continued) Financial assets The Company classifies its financial assets to be accounted in three categories as “Financial assets

accounted for with the “amortized cost“ method”, “Financial assets at fair value through profit or loss” and

“Financial assets whose fair value is reflected in other comprehensive income”.The classification is based

on the business model and expected cash flows, which are determined according to the purpose of

benefiting from financial assets. The Company management makes the classification of financial assets on

the date of purchase.

(a) Financial Assets accounted for at amortized cost The company classifies the financial assets which have fixed or determinable payments and are not traded

in an active market and non-derivative financial assets as “assets that are accounted for at their amortized

cost” because the Company's management adopts “the business model of collecting contractual cash

flows” and that the terms of the contract include interest payments due to capital and capital balances on

certain dates. If the maturity is less than 12 months from the date of the consolidated statement of financial

position, the assets are classified as current assets. If the maturity is longer than 12 months from the date

of the consolidated statement of financial position, the assets are classified as non- current assets. Assets

recognized under amortized cost amount include “trade receivables”, “other receivables” and “cash and

cash equivalents” in the consolidated statement of financial position. In addition, trade receivables collected

from factoring companies within the scope of trade receivables are classified as assets that are accounted

for at amortized cost value since the collection risk is not transferred.

Impairment

As the Company does not include an important financing component in the trade receivables accounted at

amortized cost value in the consolidated financial statements, the company selects the simplified

application and uses the corresponding matrix to calculate the impairment. With this application, the

Company measures the expected credit loss provision from an amount equal to the expected credit losses

of the lifetime when the trade receivables are not impaired due to certain reasons. The expected credit loss

provision is calculated based on the Company's past loan loss experience and the expected loan loss rate

determined by the future macroeconomic indicators.

(b) Financial assets measured at fair value

The assets that the Company management adopts based on contractual cash flow collection and/or sales

business model are classified as assets measured at fair value.If the Group Management has no intention

to sell the related assets within 12 months since consolidated financial statements date the related assets

are classified as non-current assets. When the first recognition of investments in equity-based financial

assets, the Group's equity investment is carried at measured fair value difference on profit or loss on the

consolidated statement of profit or loss; The Company makes a selection that can not be changed in such

a situation.


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2. Basis of presentation of financial statements (continued)

2.4 Summary of significant accounting policies (continued) Financial assets(continued)

i) “Financial assets measured at fair value through profit or loss”,

Financial assets at fair value through profit or loss; These financial assets consist of the financial assets

held for trading in the short term, regardless of the reason for the short-term fluctuations in the market and

the derivative instruments included in the consolidated statement of financial position. Derivative financial

instruments are recognized as assets when the fair value is positive and as liabilities when the fair value is

negative. The Group's derivative instruments consist of related transactions to time foreign currency

purchas /sale contracts. Financial assets at fair value through profit or loss are firstly recognized in the

consolidated statement of financial position, including transaction costs. These financial assets are valued

at their fair values in the following periods. Realized or unrealized gains and losses are recognized in

finance income / expense. Dividends received are recognized in profit or loss as profit share income.

Derivatives are also classified as financial assets at fair value through profit or loss (Note 21).

ii) “Financial assets measured at fair value through other comprehensive income”,

Financial assets measured at fair value through other comprehensive income are assets that are either

equity securities or debt securities. The Company measures related financial assets at fair value. Gains or

losses on a financial asset measured at fair value through other comprehensive income is recognised in

other comprehensive income, except for foreign exchange gains and losses. When an equity security is

derecognised, the cumulative gain or loss previously recognised in other comprehensive income is

reclassified to retained earnings. When a debt security is derecognised, the cumulative gain or loss

previously recognised in other comprehensive income is reclassified to profit or loss.

Fair value of financial instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date. The best fair value is the quoted market

price of a financial instrument, if available.

The methods and assumptions in fair value estimation of the financial instruments of the Company are

explained in Note 28.


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2.4 Summary of significant accounting policies (continued) Trade and other receivables

Trade receivables are recognized with invoiced amounts and carried at amortized cost using the effective

interest method, less any provision for doubtful receivables. Bonds and forward checks classified in trade

receivables are carried at amortized cost using the effective interest rate method.

The Company has preferred to apply the simplified approach defined in TFRS 9 within the scope of the

impairment calculations of trade receivables that are accounted for at amortized cost in the consolidated

financial statements and which do not include a significant financing component (less than one year).

With this approach, the Group measures the provision for losses on trade receivables from an amount

equal to the expected credit losses if the trade receivables are not impaired for certain reasons (except for

the realized impairment losses).

Financial investments

All financial investments are recorded with the cost value, which is considered to express the fair value at

the time of the first purchase and includes transaction costs. As of December 31, 2019 and December 31,

2018, all financial investments are “available-for-sale financial assets”.

After the first registration, financial investments ready for sale are valued with their fair values. Interest

earned from financial investments is shown as interest income. Other gains or losses from financial

investments are shown in the account item of “value increase funds” in a separate item within the equity

until the related assets are sold, converted to cash or otherwise disposed or subjected to impairment in

any way, and after this date income and associated with expense accounts.

Financial investments traded at Borsa İstanbul A.Ş. are valued at the end of the working day at the balance

sheet date based on the market prices. When there is no viable valuation method for valuing financial

investments that are not traded in the stock exchange, the relevant financial investments are valued at their

historical costs.

Impairment of financial assets

Financial assets or groups of financial assets, other than financial assets whose fair value difference is

reflected in profit or loss, are assessed at each balance sheet on whether there are indicators of impairment.

Impairment loss occurs when one or more events occur after the initial recognition of the financial asset

and the adverse impact of that event on the future cash flows that can be reliably predicted by the relevant

financial asset or group of assets is impaired.

For equity instruments ready for sale, the fact that fair value is below the cost with a significant and

continuous decrease is considered an objective impairment indicator.

Those other than gains or losses from financial assets other than the impairment gains and losses and

foreign exchange income or expenses are reflected in other comprehensive income. In the event that such

assets are sold, valuation differences classified into other comprehensive income are classified in previous

years' profits.


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2.4 Summary of significant accounting policies (continued) Financial investments (continued)

Impairment of financial assets (continued)

Except for trade receivables, where the carrying amount is reduced through the use of a reserve account,

impairment is directly deducted from the book value of the financial asset in all financial assets. If the trade

receivable cannot be collected, the amount in question is deleted by deducting it from the reserve account.

Changes in reserve account are accounted for in the income statement.

The increase in the fair value of the equity instruments available for sale after the impairment is directly

accounted in the equity.

For equity instruments available for sale, impairment loss, which was recognized in profit / loss in previous

periods, is not canceled in profit / loss. The fair value increase resulting from impairment loss is recognized

in other comprehensive income and is collected under the heading of revaluation provision for investments.

Impairment loss for available-for-sale debt securities is canceled in profit / loss in the following periods when

the fair value of the investment is associated with an event that occurs after the impairment loss is

recognized.

Financial liabilities

Financial liabilities are initially accounted at their fair values, free of transaction costs, and are carried over

from the amortized cost using the effective interest method along with the interest expense calculated over

the effective interest rate in the following periods.

Effective interest method is the method of calculating the amortized costs of the financial liability and

distributing the related interest expense to the related period. Effective interest rate; It is the rate that

precisely reduces the estimated future cash payments to be made in the lifetime of the financial instrument

or, if appropriate, for a shorter period of time, to the net present value of the relevant financial liability.

Borrowings

All borrowings are initially recognized at cost, being the fair value of the consideration received net of issue

costs associated with the borrowing.

After initial recognition, borrowings are subsequently measured at amortized cost using the effective

interest rate method. Amortized cost is calculated by taking into account any issue costs, and any discount

or premium on settlement.

Gains and losses are recognized in net profit or loss when the liabilities are derecognized, as well as through

the amortization process.


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2.4 Summary of significant accounting policies (continued) Trade payables and other payables Trade and other payables are carried at amortized cost which is the fair value of the consideration to be

paid in the future for goods and services received, whether or not billed to the Company.

Recognition and de-recognition of financial instruments The Company recognizes a financial asset or financial liability in its balance sheet when and only when it

becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial

asset or a portion of financial asset when and only when it loses control of the contractual rights that

comprise the financial asset or a portion of financial asset. The Company derecognizes a financial liability

when liability is extinguished that is when the obligation specified in the contract is discharged, cancelled

and expired.

2.5 Changes in accounting policies The accounting policies used in the preparation of the consolidated financial statements for the period of

1 January - 30 June 2019 have been applied consistently with the consolidated financial statements

prepared as of 31 December 2018, with the exception of TFRS 16 Leasing Standards, which are effective

as of 1 January 2019.

Effects on the consolidated financial statements The Company has applied TFRS 16 Leases Standard in the accounting period starting on January 1,

2019 and the effects of the related standard on the consolidated financial statements are explained

below, and the current accounting policies are explained in Note 2.2.

In the application of TFRS 16 Leases, the Group benefited from the exemption, which allows not to

rearrange comparative information on previous periods regarding classification and measurement

changes.

The differences in the book value of financial assets and financial liabilities arising from the application of

TFRS 16 have been accounted for in previous years' profits as of January 1, 2019.

The cumulative effects of the implementation of the TFRS 16 standard on the financial statement of 1

January 2019 are presented below:

Assets

Property, plant and equipment (right of use of asset) 69,685,740

Prepaid expenses (8,611,328)

Resources

Rental obligation 61.074.412

The standard is applied for annual periods beginning on or after January 1, 2019. Due to its transition to

TFRS 16, there will be an improvement in the Company's main operating profit but an increase in financing

expenses. This is due to the change in the accounting of leases that were accounted for as operating leases

under TAS 17 in previous periods.


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3. Segment reporting Since major portion of the foreign sales of the Company are made on a one-off basis to different

geographical regions, the distribution of sales according to geographical regions is not consistent

throughout the years. Therefore, details of revenues are disclosed as foreign and domestic sales in Note

18.

The Company manages and organizes its operations depending on the content of provided services and

goods. The Company prepares its segment reporting in accordance with TFRS 8. As of December 31, 2019

and December 31, 2018; information about the Company’s segments consists of revenues and profits

related with cement (including clinker and aggregate) and ready mix concrete.

1 January - 31 December

2019 Cement Ready- mixed

concrete Unallocated Elimination Total

Revenue 1.470.973.218 469.569.998 - (114.437.392) 1.826.105.824 Cost of sales (-) (1.220.425.285) (467.122.654) - 114.437.392 (1.573.110.547) Gross profit 250.547.933 2.447.344 - - 252.995.277 General admınistrative,

marketing expenses (-) (90.857.478) (14.933.128) - - (105.790.606)

Other income/expenses from operating activities (-), net

(4.387.426) 5.741.699 - - 1.354.273

Operating profit 155.303.029 (6.744.085) - - 148.558.944 Income/expense from

investing activities (-), net

34.088.676 36.543.727 - - 70.632.403

Financial income/expense (-), net

(131.877.529) - - - (131.877.529)

Profit before tax from

continuing operations 57.514.176 29.799.642 - - 87.313.818

Tax income/(expense) - - (12.345.052) - (12.345.052) Current income tax

expense (-) - - (6.807.220) - (6.807.220)

Deferred tax income/(expense)

- - (5.537.832) - (5.537.832)

Profit from continuing

operations 57.514.176 29.799.642 (12.345.052) - 74.968.4766

31 December 2019 Cement Ready- mixed concrete Unallocated Elimination Total Assets and

liabilities

Segment assets 1.448.694.724 193.014.485 - - 1.641.709.209 Associates - - 159.966.650 - 159.966.650 Unallocated assets - - 208.070.629 - 208.070.629 Total assets 1.448.694.724 193.014.485 368.037.279 - 2.009.746.488 Unallocated liabilities - - 2.009.746.488 - 2.009.746.488 Total liabilities - - 2.009.746.488 - 2.009.746.488 1 January - 31

December 2019 Cement Ready- mixed concrete Unallocated Elimination Total

Other segment information

Capital expenditures (expenses)

Tangible and intangible assets

74.429.783 6.673.000 - - 81.102.783

Total capital

expenditures 74.429.783 6.673.000 - - 81.102.783

Amortization expenses

69.387.269 13.555.572 - - 82.942.841

Depreciation expenses

3.980.794 19.124 - - 3.999.918


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3. Segment reporting (continued)

1 January - 31 December 2018

Cement

Ready- mixed concrete

Unallocated

Elimination

Total

Revenue 1.380.568.817 468.689.488 - (133.688.204) 1.715.570.101 Cost of sales (-) (1.018.592.084) (465.131.471) - 133.688.204 (1.350.035.351) Gross profit 361.976.733 3.558.017 - - 365.534.750 General admınistrative, marketing expenses

(-) (81.782.539) (13.652.879) - - (95.435.418)

Other income/expenses from operating activities (-), net

(22.653.186) 18.784.843 - - (3.868.343)

Operating profit 257.541.008 8.689.981 - - 266.230.989 Income/expense from investing activities (-),

net 35.664.002 - - - 35.664.002

Financial income/expense (-), net (77.672.629) (2.472.325) - - (80.144.954) Profit before tax from continuing

operations 215.532.381 6.217.656 - - 221.750.037

Tax income/(expense) - - (41.992.608) - (41.992.608) Current income tax expense (-) - - (49.980.521) - (49.980.521) Deferred tax income/(expense) - - 7.987.913 - 7.987.913 Profit from continuing operations 215.532.381 6.217.656 (41.992.608) - 179.757.429

31 December 2018

Cement Ready- mixed

concrete

Unallocated

Elimination

Total Assets and liabilities Segment assets 1.515.048.672 205.482.254 - - 1.720.530.926 Associates - - 140.844.587 - 140.844.587 Unallocated assets - - 299.151.580 - 299.151.580 Total assets 1.515.048.672 205.482.254 439.996.167 - 2.160.527.093 Unallocated liabilities - - 2.160.527.093 - 2.160.527.093 Total liabilities - - 2.160.527.093 - 2.160.527.093

1 January - 31 December 2018

Cement Ready- mixed

concrete

Unallocated

Elimination

Total Other segment information

Capital expenditures (expenses) Tangible and intangible assets 86.401.190 14.489.289 - - 100.890.479 Total capital expenditures 86.401.190 14.489.289 - - 100.890.479 Amortization expenses 67.089.825 12.999.878 - - 80.089.703 Depreciation expenses 4.027.052 73.600 - - 4.100.652


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4. Cash and cash equivalents

31 December 2019

31 December

2018

Cash at banks (including short-term time deposits) 147.754.484 263.702.182

Checks in collection 4.287.280 11.719.000

Cash in hand 49 31

Total 152.041.813 275.421.213 Depending on the immediate cash needs of the Company, time deposits have 1-30 days maturities for TL

and USD (December 31, 2018 – 1-30 days for TL and USD). Interest rates for TL time deposits are 10,75%

and for USD time deposits 0,40% (December 31, 2018 for TL 23,30%, USD 4,00%).

The Company does not have blocked deposits as of December 31, 2019 and December 31, 2018.

5. Financial assets 31 December 2019 31 December 2018

Share (%)

Amount

Share (%)

Amount

Financial assets measured at fair value through other comprehensive income

Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi (Çimsa) 8,98 110.145.485 8,98 91.585.728 Arpaş Ambarlı Römorkaj Pilataj Ticaret A.Ş. (Arpaş) (*) 16,00 33.627.428 16,00 33.627.428 Liman İşletmeleri ve Nakliyecilik A.Ş. (Liman İşletmeleri) 15,00 13.218.698 15,00 13.218.698 Eterpark Endüstri Ürünleri İmalat Ticaret İthalat İhracat Pazarlama A.Ş. (Eterpark)

8,73

1.549.260

8,73

1.549.260

Ambarli Kılavuzluk A.Ş. 16,00 800.000 - - Altaş Ambarlı Liman Tesisleri A.Ş. (Altaş) 14,00 800.000 14,00 863.473 Total 159.966.650 140.844.587

(*) Arpas continues to use the operational license, which is expected to expire on September 24, 2018, with

temporary authorization. The Company has calculated the fair value of the shares held by the Company

due to the fact that the license has not been renewed yet by using the adjusted net asset value method.

The shares of Çimsa traded at Borsa İstanbul A.Ş. were measured with the market prices at

31 December 2019 and 31 December 2018. The decrease in the fair value of the Group in the current

period amounting to TL 74.239.027 (December 31, 2018 - TL 25.716.787) is presented in the

comprehensive income statement.

1 January 2019

Addittions Value increase/(decrease)

31 December 2019 Çimsa 91.585.728 18.559.757 110.145.485 Arpaş 33.627.428 - 33.627.428 Liman İşletmeleri 13.218.698 - 13.218.698 Eterpark 1.549.260 - 1.549.260 Altaş 863.473 (237.694) 625.779 Ambarlı Kılavuzluk - 800.000 - 800.000 Toplam 140.844.587 800.000 18.322.063 159.966.650

As of 31 December 2019, the Company measured its financial assets at fair value and the net increase in

the amount of TL 18.322.063 is presented in the comprehensive income statement. In this analysis, the

main assumptions used in making the discounted cash flow projections for TL denominated financial

statements up to the year 2025, weighted average cost of capital (Altas: 24,56%, Eterpark: 25,14%, Port

Operations: 24,57%). and long-term growth rate (6,5%).


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5. Financial assets (continued) 31 December 2019

Currency

Discount

rate (%)

Discount Ratae %1 Change effect +/-

Liman İşletmeleri TL 15,75 (1.293.072)/1.605.956

Eterpark TL 15,75 (124.541)/154.709

Altaş TL 15,75 (29.585)/36.752

6. Financial liabilities Short-term financial liabilities

31 December 2019

Currency Original Amount

Term

Interest(%)

TL Balance

Short-term loans TL (**) 100.000.000 16 June 2020 %14,00 103.651.067 TL (**) 100.000.000 25 June 2020 %19,75 105.164.997 TL (**) 25.000.000 31 March 2020 %15,75 25.164.062 TL (**) 10.000.000 3 January 2020 %10,80 10.126.000 244.106.126

31 December 2018 Currency Original amount Term Interest (%) TL Balance Short-term loans TL (**) 150.000.000 15 October 2019 %37,20 162.958.870 TL (**) 100.000.000 3 May 2019 %17,45 112.201.654 TL (**) 50.000.000 9 September 2019 %36,55 55.267.447 TL (**) 50.000.000 4 October 2019 %37,30 54.066.014 TL 877.341 2 January 2019 - 877.341 USD(**) 5.000.000 23 May 2019 %3,24 25.622.132 USD (**) 5.000.000 23 May 2019 %3,24 25.274.229 USD (**) 5.000.000 23 May 2019 %3,24 25.279.303 461.546.990

Short-term parts of long-term financial borrowings

31 Aralık 2019 Currency Principal Maturity Interest Rate (%) TL Balance Interest and valuation of long-term loan

TL (**) 75.000.000 2 November 2020 %12,50 1.488.077

TL (**) 75.000.000 11 November 2020 %12,25 1.231.316 2.719.393 The company does not have short-term parts of long-term financial borrowings as of December 31, 2018.


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6. Financial liabilities (continued)

Long-term borrowings

31 December 2019 Currency Principal Maturity Interest Rate (%) TL Balance Long-term borrowings TL (**) 75.000.000 1 November 2021 %12,50 75.000.000 TL (**) 75.000.000 1 November 2021 %12,25 75.000.000 150.000.000

31 December 2018 Currency Principal Maturity Interest Rate(%) TL Balance Long-term borrowings TL (**) 25.000.000 31 March 2020 %15,75 25.151.480 TL (**) 75.000.000 31 March 2020 %15,50 78.462.542 103.614.022 (**) Fixed interest loans The movements of long-term borrowings parts of long-term financial borrowings between 1 January - 31

December 2019 and 1 January - 31 December 2018 are as follows:

Bank Loans

Capital

Interest

Exchange rate

difference

Total Period beginning January 1 530.834.312 21.678.701 12.648.000 565.161.013 Provisions received during the period/exchange rate difference

667.672.857 137.879.554 12.195.921 817.748.332

Paid-offsetting in the period (814.243.762) (146.996.143)

(24.843.921)

(986.083.826)

31 December 2019 384.263.407 12.562.112 - 396.825.519

Bank Loans

Capital

Interest

Exchange rate

difference

Total Period beginning January 1 374.043.469 11.375.664 - 385.419.133 Provisions received during the period/exchange rate difference

529.790.843 71.200.829 12.648.000

613.639.672

Paid-offsetting in the period (373.000.000)

(60.897.792)

- (433.897.792)

31 December 2018 530.834.312 21.678.701 12.648.000

565.161.013

Payables from leases

31 December 2019 Currency TL Balance

Payables from short-term lease transactions TL 8.833.155

Payables from long-term lease transactions TL 70.795.794

79.628.949


(105)

Movement of debts from leasing transactions is presented below:

Payables from

leases

1 January 2019

-

Effect of change in accounting policies

61.074.412

Additions

24.199.227

Interest expense

12.671.757

Payments

(18.316.447)

31 December 2019 79.628.949

7. Trade receivables and payables Trade receivables Short-term trade receivables

31 December 2019

31 December

2018

Trade receivables, net 220.514.523 243.862.814

Notes receivables and post-dated checks, net 95.188.722 167.837.871

Due from associates (Note 26) 15.262 104.380

Due from related parties (Note 26) 53.357.521 32.136.978

Doubtful receivables 21.063.962 17.243.698

Provision for doubtful receivables (-) (21.063.962) (17.243.698)

369.076.028 443.942.043 The effective interest rates used to calculate net book value of the receivables are 24,6538% for TL,

2,80763% for USD (December 31,2018 14,9600% for TL, 1,69428 % for USD). The provision for doubtful receivables allocated for trade receivables is determined based on past

experience of uncollectability. The Company has made a provision of TL 632.644 in return for the expected

loss under TFRS 9.

The movement of the provision for doubtful receivables for the period ended December 31, 2019 and

December 31, 2018 is as follows:

2019 2018

1 January 17.414.218 14.140.947

Provision for doubtful receivables in the current period

(Note 19)

4.551.464 3.571.951

Collections (Note 19) (901.720) (469.200)

31 December 21.063.962 17.243.698 The collection period of trade receivables varies depending on the product quality and the contracts with

the customers and the average is 70 days (31 December 2017 - 89 days).

The Company recognizes the expected losses on trade receivables over their trade receivables within the

net account.


(106)

As of December 31, 2018 and December 31, 2017, the maturity analysis of trade receivables is as

follows:

Past due but not impaired Not due

receivables Less than

one month 1-2

months 2-3

months 3-4

months More

than 4 months

Total

31 December 2019 307.691.413 5.707.272 1.396.677 131.144 142.840 633.899 315.703.245 31 December 2018 395.856.095 11.884.836 2.886.264 781.105 197.067 95.318 411.700.685


(107)

7. Trade receivables and payables (continued) Trade payables Short-term trade payables

31 December 2019 31 December 2018 Suppliers, net 261.921.900 263.192.346 Due to associates (Note 26) 2.667.773 812.399 Due to related parties (Note 26) 90.448.372 75.352.373 Due to shareholders (Note 26) 717.900 625.103 355.755.945 339.982.221

The average payment period of trade payables is between 30 to 45 days. (December 31, 2018: between

30 to 45 days)

The effective interest rates used to calculate net book value of the payables are 24,6538% for TL and 1,903

% for USD (December 31, 2018 14,9600% for TL - 1,69428% for USD).

8. Other receivables, other payables, deferred income and employee benefit obligations

Short-term other receivables

31 December 2019

31 December

2018 Deferred VAT 50.211.686 9.972.059

Insurance payables 478.782 470.391

Due from personnel (Note 26) 131.105 240.479

Deposits and guarantees given 9.550 9.550

Other 866.445 338.469

51.697.568 11.030.948

31 December 2019

31 December

2018

Deposits and guarantees received 4.000.345 3.432.587

Taxes and funds payable 2.382.681 2.646.317

Other payables (*) 6.427.617 5.937.677

12.016.581 12.988.540 (*) A large part of the balance consists of the part of the State share from the income to be obtained

through mining.

Short-term deferred income

31 December 2019

31 December 2018

Advances received 2.536.025 5.142.166

2.536.025

5.142.166


(108)

8. Other receivables, other payables, deferred income and employee benefit obligations (continued)

Short-term employee benefit obligations

31 December 2019

31 December

2018

Social security premiums payable 3.573.796 3.050.519

Due to personnel (Note 26) 2.069.378 1.663.056

Taxes and funds payable 3.069.693 2.658.123

8.712.867 7.371.698

Other long-term receivables

31 December 2019

31 December

2018

Deposits and guarantees given 3.829.453 2.959.286

3.829.453 2.959.286

9. Inventories

31 December 2018

31 December

2017

Raw materials, net 118.034.393 151.220.635

Semi finished goods 35.774.826 64.173.987

Finished goods 21.011.286 25.872.139

Goods in transit 6.405.123 3.673.193

181.225.628 244.939.954

As of December 31, 2019 and 2018, the movement of provision for impairment of inventories is presented

below:

2019 2018

1 January 23.539.883 21.361.639

Current year charge (*) 2.436.000 2.178.244

31 December 25.975.883 23.539.883

(*) Accounted for under cost of sales.


(109)

10. Property, plant and equipment 1 January

2019

Additions

Transfers(*)

Disposals 31 December

2019 Cost Land and land improvements 173.644.125 - 3.891.553 (10.428.565) 167.107.113 Buildings 310.007.400 5.000 1.837.980 (940.109) 310.910.271 Machinery and equipment 1.609.133.747 397.320 53.742.344 (11.696.970) 1.651.322.629 Furniture, fixtures and motor vehicles 96.893.106 639.215 4.173.474 (3.922.704) 97.783.091 Leasehold improvements 78.080.704 12.680 10.106.745 (3.503.519) 84.696.610 Construction-in-progress 21.990.164 79.773.400 (75.065.091) - 26.698.473 Total 2.289.749.246 80.573.803 (1.312.995) (30.491.867) 2.338.518.187 Less: Accumulated depreciation: Land and land improvements 90.540.214 3.022.529 - (1.541.823) 92.020.920 Buildings 203.547.118 10.387.515 - (209.181) 213.725.452 Machinery and equipment 1.047.194.097 55.083.568 - (9.759.796) 1.092.517.869 Furniture, fixtures and motor vehicles 60.363.612 8.020.171 - (3.357.925) 65.025.858 Leasehold improvements 45.552.679 6.429.058 - (2.856.283) 49.125.454 Total 1.447.197.720 82.942.841 - (17.725.008) 1.512.415.553 Property, plant and equipment, net 842.551.526 826.102.634 1 January

2018

Additions

Transfers(*)

Disposals 31 December

2018 Cost Land and land improvements 170.635.632 22.092 4.533.477 (1.547.076) 173.644.125 Buildings 301.436.519 - 8.575.281 (4.400) 310.007.400 Machinery and equipment 1.529.791.962 397.320 80.270.735 (1.326.270) 1.609.133.747 Furniture, fixtures and motor vehicles 89.809.313 528.588 7.008.524 (453.319) 96.893.106 Leasehold improvements 67.385.268 19.562 11.297.965 (622.091) 78.080.704 Construction-in-progress 40.745.229 99.817.698 (118.572.763) - 21.990.164 Total 2.199.803.923 100.785.260 (6.886.781) (3.953.156) 2.289.749.246 Less: Accumulated depreciation: Land and land improvements 87.447.516 3.141.578 - (48.880) 90.540.214 Buildings 192.837.250 10.714.268 - (4.400) 203.547.118 Machinery and equipment 994.890.474 53.463.287 - (1.159.664) 1.047.194.097 Furniture, fixtures and motor vehicles 52.772.785 7.972.372 - (381.545) 60.363.612 Leasehold improvements 41.376.571 4.798.198 - (622.090) 45.552.679 Total 1.369.324.596 80.089.703 - (2.216.579) 1.447.197.720 Property, plant and equipment, net 830.479.327 842.551.526 (*) As of 31 December 2019, there is TL 1.312.995 transfer from investments to intangible assets (31

December 2018 - 6.886.781 TL)

As of December 31, 2019, the total cost of tangible assets purchased with financial leasing amounts

TL 16.133.647 (December 31, 2018 – TL 16.327.406) and the total accumulated depreciation amounts

TL 10.474.662 (December 31, 2018 – TL 10.645.035).

As of December 31, 2019, total gross value of property, plant and equipment and intangible assets which

are fully depreciated/amortized but are still in use is TL 866.380.580 (December 31, 2018 – TL

817.157.331).

Pledge and mortgages on assets

There are no pledges or mortgages on Company’s property, plant and equipment as of December 31, 2019

and December 31, 2018.


(110)

11. Intangible assets

1 January

2019

Additions /

charge

Transfers from construction-in-

progress

Disposals

31 December

2019

Cost Rights and other intangibles 84.461.209 7.538 1.312.995 (407.334) 85.374.407 Less: Accumulated amortization Rights and other intangibles 39.150.857 3.999.918 (281.172) 42.869.603 Intangible assets, net 45.310.352 42.504.804

1 January 2018

Additions/ charge

Transfers from

construction-in-progress

Disposals

31 December

2018

Cost Rights and other intangibles 77.469.209 105.219 6.886.781 - 84.461.209 - Less: Accumulated amortization Rights and other intangibles 35.050.205 4.100.652 - - 39.150.857 Intangible assets, net 42.419.004 45.310.352

(*) As of December 31, 2019, intangible assets amounting to TL 44.995.972 consist of mining rights

(December 31, 2018 -

TL 44.655.615).

(**) As of December 31, 2019, TL 12.370.783 of this amount consists of mining rights related

accumulated amortization (December 31, 2018 - TL 11.968.353).

Rights and other intangibles mainly consist of the rights, computer software and mining rights. 12. Goodwill

The Company has finalized the fair value determination of the assets and liabilities of the Ladik Cement

Plant purchased as of May 1, 2007 and the goodwill has been recorded as TL 129.457.887.

The Company has purchased the Çarşamba Hazır Beton Plant for TL 1.059.322 as of 28 November 2017

and has recorded the goodwill amounting to TL 622.982 to the records of machinery and equipment

amounting to TL 436.340.

As of December 31, 2019, the Company has performed an impairment analysis on the goodwill account

based on the value of the cash-generating unit it is involved in. As a result of this study, it has not required

any reserve. In this analysis; the principal assumptions used to make the discounted cash flow projected in

TL denominated financial budgets up to 2024 are the weighted average cost of capital using a rate of

15,62% (31 December 2018 - 23,86 %) under the 3,00% (31 December 2018 – 3,00%) sensibility test. The

Company foresees that a five-year analysis is appropriate for the evaluation of operational results and

prospective forecasts in its sector and restates the impairment test on five-year budgets.

31 December 2019

Currency

Discount Rate (%)

Change Effect %1 +/-

Akçansa TL 15,75 (231.000000)/287.000.000


(111)

13. Provisions, contingent assets and liabilities Short-term provisions for employee benefits

31 December 2018

31 December

2018 Vacation pay liability 4.540.864 3.879.167 Bonus accruals to be paid to executive management - 4.061.004 4.540.864 7.940.171

Other short-term provisions

31 December 2019

31 December 2018

Provision for lawsuits 4.407.935 3.929.524 Other 125.377 2.761.027 4.533.312 6.690.551

Provision for lawsuits (Note 21)

Vacation pay liability

Bonus accruals

to be paid to executive

management

Other January 1, 2019 3.929.524 3.879.167 4.061.004 2.761.027 Change in vacations, net - 1.757.454 - - Current year charge - - - - Payments (1.930.648) (1.095.756) (2.762.668) (2.635.650) Changes in the assumptions 2.409.059 - (1.298.336) - 31 December 2019 4.407.935 4.540.864 - 125.377

Provision for lawsuits (Note 21)

Vacation pay liability

Bonus accruals

to be paid to executive

management

Other January 1, 2018 2.805.818 3.708.806 2.326.456 - Change in vacations, net - 170.361 - - Current year charge - - 3.284.867 2.761.027 Payments (467.802) - (1.550.319) - Changes in the assumptions 1.591.508 - - - 31 December 2018 3.929.524 3.879.167 4.061.004 2.761.027 Other long-term provisions

Provision to make mine fields natural 31 December 2019

31 December 2018

January 1 2.779.836 4.286.042

Current year charge/(reversal) 821.204 (1.475.381)

Discount effect 832.298 (30.825)

4.433.339 2.779.836


(112)

13. Provisions, contingent assets and liabilities (continued)

Guarantees received and given

As of 31 December 2019 and 31 December 2018, the guarantees given and taken in the name of the

Company's own legal entity are as follows:

31 December 2019 31 December 2018 Currency Original Amount Original Amount Original Amount TL equivalent Guarantee letters received Eur 549.410 3.653.906 298.970 1.802.191 Guarantee letters received USD - - 37.289 196.174 Guarantee letters received TL - 233.381.828 - 249.810.158 Mortgages received TL - 44.409.761 - 54.183.853 Cheques and notes received

TL - 14.419.509 - 14.620.146

Cheques and notes received

Eur 53.100 353.147 53.100 320.087

Cheques and notes received

USD 135.225 803.264 135.225 711.405

Total guarantees received 297.021.415 321.644.014

31 December 2019

31 December 2018

Currency Original Amount TL equivalent Original Amount TL equivalent A. Total amount of guarantees given on the behalf of legal entity

- 24.894.053

111.510.474

TL - 23.896.099 - 21.279.978 USD 168.000 997.954 17.151.152 90.230.496 EUR - - - -

B. Total amount of guarantees given on behalf of associations that included in full consolidation

- - - -

C. Total amount of guarantees given on behalf of third parties liabilities within the context of business operations

- - - -

D. Total amount of other guarantees given - - - - i. Total amount of guarantees given

on behalf of main shareholder - - - -

ii. Total amount of guarantees given on behalf of group Company which is not under Section B and C

- - - -

iii. Total amount of guarantees given on behalf of third parties which is not under Section C

- - - -

Total guarantees given 24.894.053 111.510.474 The percentage of the Company’s other GPMs to the Company’s equity is 0% as of December 31, 2019

(December 31, 2018– 0%).

Insurance coverage on assets

Insurance coverage on assets including cash, inventories and property, plant and equipment of the

Company is TL 4.711.296.212 (31 December 2018 – TL 4.312.377.174).

Lawsuits

As of December 31, 2019, there were a number of legal proceedings outstanding against the Company in

which total claims amounted to TL 13.828.582 (December 31, 2018 – TL 13.451.975). These lawsuits

principally involve matters relating to employee claims against the Company or claims by the families of

employees due to accidents which occurred at work and cases opened by third parties due to accidents


(113)

because of the alleged negligence of the Company’s personnel. As of December 31, 2019, the Company

has provided a provision for an amount of TL 4.407.935 (December 31, 2018– TL 3.929.524) .

13. Provisions, contingent assets and liabilities (continued)

Possible contingencies related to environment law and land protection and utilization law According to the Environment Law, the operations of the Company such as mining, cement production are

subject to legislation in Turkey. All liabilities such as taxes, duties and emission fees resulting from this

legislation have been fulfilled by the Company. However, this legislation did not specifically address the

costs that could arise from recovering the damage, pollution in the land while vacating the mines. The

Company calculated the estimated cost of the actions that the Company deems that would meet the

requirements of legislation related with the mining area it operates on. As a result, related with the surface

area which is already excavated as of December 31, 2019, the Company has accounted a recultivation

provision at an amount of TL 4.433.339 (31 December 2018 – TL 2.779.836) in “Long-term provisions”.

Derivative instruments

31 December

2019

31 December

2018

Derivative instruments - 19.766.287

- 19.766.287

The Company carried out forward transactions to hedge the foreign exchange risk of loans with HSBC bank

total value of USD 14.400.000. As of 31 December 2018, the fair value of TL19.766.287 is recognized as

derivative liability. As of December 31, 2019, the company does not have any derivative transactions.

14. Commitments

31 December 2018

Effect of change in accounting

policies

Addition

Disposal

31 December

2019 Cost Property - 65.924.863 4.216.922 - 70.141.785 Fixtures - 347.598 10.557.841 (243.532) 11.148.971 Vehicles - 3.413.279 7.421.011 - 10.834.290 Total - 69.685.740 22.195.774 (243.532) 92.125.046 Minus: Accumulated depreciation Property - - 7195.302 - 7.195.302 Fixtures - - 726.061 (7.856) 718.205 Vehicles - - 2.562.457 - 2.562.457 Total - - 10.483.820 (7.856) 10.475.964 Right to use assets, net - 69.685.740 11.711.954 (235.676) 81.649.082


(114)

15. Employee benefits

Long-term provision for employee termination benefits 31 December 2019 31 December 2018 Provision for employee termination benefits 42.299.223 37.833.667 Seniority incentive premium 10.553.041 8.080.969 52.852.264 45.914.636

According to the Turkish Labor Law, the Company is obliged to pay a certain amount of severance pay to

the personnel who have left their jobs due to retirement after the service for at least one year or whose

employment is terminated due to reasons other than resignation and bad situation. The amount payable

consists of one month's salary limited to a maximum of TL 6.379,86 as of December 31, 2019 (31 December

2017 - TL 5.434,42) for each year of service.

Turkey Accounting Standards (TAS) 19 (Employee Benefits) in accordance with the required actuarial

calculations is to calculate the company's obligations. The Company has reflected the retirement pay

provision in accordance with TAS 19 using the Projection Method and the actuarial method and

assumptions based on the calculations made by the professional actuary.

All actuarial gains and losses are recognized in other comprehensive income / (expense) in equity.

The main actuarial assumptions used to calculate the liability at the balance sheet dates are as follows:

31 December

2019 31 December

2018

Discount rate %12,60 %16,40

Estimated salary increase rate %8,00 %11,00


(115)

15. Employee benefits (continued) Movement of the reserve for the employee termination benefits as of December 31, 2019 and December

31, 2018 is as follows:

Provision for employee termination benefits 31 December 2019 31 December 2018 January 1 37.833.667 34.311.969 Retirement pay liability paid (8.609.941) (4.190.242) Actuarial gain/loss 5.875.113 3.212.905 Interest expense 6.072.233 3.870.825 Charge for the year 1.128.151 628.210 42.299.223 37.833.667 Sensitivity analysis of the discount rates used for retirement pay liability calculation as of December 31,

2019 and December 31, 2018 is as follows:

2019 2018

%1 decrease %1 increase %1 decrease %1 increase Sensitivity (%19,90) (%18,00) (%15,40) (%17,40) Retirement pay liability change 2.437.646 (2.316.725) 1.037.858 (846.249)

On January 31, 2019, the Company has signed the Collective Bargaining Agreement with effect from

January 1, 2018 to December 31, 2019, by agreeing to Collective Labor Agreement negotiations between

the Cement Industry Employers' Union and T. Çimse-İş Trade Union. Seniority incentive premium 31 December 2018 31 December 2017 Opening 8.080.969 6.236.256 Paid seniority incentive premium (1.613.531) (1.382.143) Charge for the year 4.085.604 3.226.856 10.553.041 8.080.969 Seniority incentive premium is the employee benefit provided in accordance with the Company policy and

the liability as of balance sheet date is recognized in the financial statements after discounting to the

present value by using the effective discount rate. 16. Prepaid expenses, other assets and liabilities Short-term prepaid expenses 31 December 2019 31 December 2018 Prepaid expenses 8.730.198 10.138.081 Advances given to suppliers 138.489 10.465.275

8.868.687 20.603.356 Long-term prepaid expenses 31 December 2019 31 December 2018

Advances given for capital expenditures 1.526.267 773.601 Prepaid rent expenses 89.700 936.471 Other - 76.730 1.615.967 1.786.802


(116)

17. Shareholders’ equity Issued capital and adjustments to share capital and equity investments

31 December 2019 31 December 2018 Number of common shares (authorized and outstanding) TL 0,01 per value

19.144.706.825

19.144.706.825

As of December 31, 2019, the Company’s paid-in capital is TL 191.447.068 (December 31, 2018 - TL

191.447.068) (based on historical costs).

As of 31 December 2019 and 31 December 2018, the Company's shareholding structure and shareholders'

shares are as follows:

31 December 2019 31 December 2018 Amount % Amount % Hacı Ömer Sabancı Holding A.Ş. 76.035.136 39,72 76.035.136 39,72 HeidelbergCement AG 76.035.135 39,72 76.035.135 39,72 Quoted shares 39.376.797 20,56 39.376.797 20,56 Total nominal capital 191.447.068 100,00 191.447.068 100,00 There is no additional right, privilege and restriction related with these shares.

Legal and other reserves

The legal reserves consist of first and second legal reserves in accordance with the Turkish Commercial

Code. The first legal reserve is appropriated out of the statutory net income at the rate of 5%, until the total

reserve reaches a maximum of 20% of the Company’s issued capital. The second legal reserve is

appropriated at the rate of 10% of all distributions in excess of 5% of the Company’s issued capital. The

legal reserves are not available for distribution unless they exceed 50% of the issued capital, other than

that legal reserves can not be used.

Listed companies distribute dividend in accordance with the Communiqué No. II-19.1 issued by the CMB

which is effective from February 1, 2014.


(117)

17. Shareholders’ equity (continued)

Companies distribute dividends in accordance with their dividend payment policies settled and dividend

payment decision taken in general assembly and also in conformity with relevant legislations. The

communiqué does not constitute a minimum dividend rate. Companies distribute dividend in accordance with

the method defined in their dividend policy or articles of incorporation. In addition, dividend can be distributed

by fixed or variable instalments and advance dividend can be paid in accordance with profit on interim financial

statements of the Company.

In accordance with the Turkish Commercial Code (TCC), unless the required reserves and the dividend for

shareholders as determined in the article of association or in the dividend distribution policy of the company

are set aside, no decision may be made to set aside other reserves, to transfer profits to the subsequent year

or to distribute dividends to the holders of usufruct right certificates, to the members of the board of directors

or to the employees; and no dividend can be distributed to these persons unless the determined dividend for

shareholders is paid in cash.

Inflation adjustments to issued capital and historical amount of extraordinary reserves can be used for in kind

capital increase, dividend distribution in cash or the net loss deduction. However, the inflation adjustment to

issued capital is subject to corporate tax if used in dividend distribution in cash.

As of December 31, 2019 and December 31, 2018, the composition of consolidated legal reserves, statutory

reserves, extraordinary reserves, accumulated profit (loss) and other reserves can be summarized as

follows:

31 December 2019

31 December

2018

Legal reserves 268.702.218 243.290.154

Statutory reserves 35 35

Extraordinary reserves 215.301 215.301

Accumulated profit due to inflation difference 7.758.970 7.758.970

Other reserves 4.812.865 4.812.865

The Company resolved at the General Assembly meeting to pay TL 1,00 gross=net dividend to TL 0,7980

nominal share resulting in 79,80% to the fully fledged tax payers and foreign-based tax payers earning

dividend through an office or an ordinary agent in Turkey. In addition, TL 0,7980 gross, TL 0,6783 net

dividend to TL 1 nominal share resulting in %79,80 % has been paid to other shareholders. Total of TL

154.166.698 cash dividend payment has been made starting from March 29, 2019.

The Company resolved at the General Assembly meeting to pay TL 0,6686 gross=net dividend to TL 1,00

nominal share resulting in 66,86 % to the fully fledged tax payers and foreign-based tax payers earning

dividend through an office or an ordinary agent in Turkey. In addition, TL 0,6686 gross, TL 0,56831 net

dividend to TL 1 nominal share resulting in 66,86 % has been paid to other shareholders. Total of TL

128.001.510 cash dividend payment has been made starting from March 30, 2018.

Non-controlling interests All non-controlling shares are eliminated from equity accounts, including paid-in capital, of consolidated

subsidiaries and presented as “Non-controlling interests” in “Shareholders’ equity” in the consolidated

balance sheet.


(118)

18. Revenue and cost of sales

Revenue

1 January – 31 December 2019

1 January –

31 December 2018

Domestic sales 1.110.613.731 1.388.277.177

Foreign sales 702.468.756 320.661.429

Sales discount (-) (8.233.926) (18.958.454)

Other discounts (-) (40.189.975) (34.453.270)

1.764.658.586 1.655.526.882 Domestic service sales 61.447.238 60.043.219

Total 1.826.105.824 1.715.570.101

Cost of sales


1 January –

31 December 2018

Direct material and supplies expenses 1.186.865.590 1.098.423.498

Direct labor expenses 94.018.805 78.873.204

Depreciation and amortization expenses 82.357.382 74.135.461

Other production expenses 94.374.379 104.017.118

Total production cost 1.457.616.156 1.355.449.281

Change in work-in-process 28.399.161 (39.998.804) Beginning work-in-process 64.173.987 24.175.183

Ending work-in-process 35.774.826 64.173.987

Change in finished goods 4.860.853 (17.554.586) Beginning finished goods 25.872.139 8.317.553

Ending finished goods 21.011.286 25.872.139

Cost of merchandise sold 54.574.236 32.804.827

Cost of domestic service sold 27.660.141 19.334.633

Total 1.573.110.547 1.350.035.351


(119)

19. Marketing and general administrative expenses 1 January –

31 December 2019 1 January –

31 December 2018

General administrative expenses 82.462.345 73.808.950

Marketing expenses 23.328.261 21.626.468

105.790.606 95.435.418


1 January –

31 December 2018

General and administrative expenses

Personnel expenses 37.554.327 35.881.509

Consultancy expenses 8.422.025 10.151.722

Outsourced services 6.618.181 5.137.095

Depreciation and amortization 11.302.543 7.730.671

Rent expenses 2.181.154 3.229.580

Representation and entertainment expenses 4.127.272 2.443.664

Traveling expenses 2.476.264 1.026.887

Taxes, duties and fees 769.685 784.563

Insurance expenses 406.639 280.181

Other expenses 8.604.256 7.143.078

82.462.345 73.808.950 Marketing expenses

Personnel expenses 9.819.900 8.725.689

Representation and entertainment expenses 1.657.277 679.857

Sales guarantee expenses 2.213.542 2.829.509

Rent expenses 901.605 1.351.943

Outsourced services 965.066 952.310

Traveling expenses 1.115.471 386.593

Depreciation and amortization expenses 795.000 233.064

Employee termination benefits 171.775 468.485

Taxes, duties and fees 262.197 256.940

Doubtful receivable expenses (Note 7) 3.649.745 3.102.751

Other expenses 1.776.684 2.639.327

23.328.261 21.626.468


(120)

20. Expenses by nature Depreciation and amortization expenses


1 January –

31 December 2018

Property, plant and equipment

Production costs 76.059.141 73.256.742


Marketing expenses 223.484 227.340

Other operating expenses 1.370.854 2.046.775

Total depreciation expenses 82.942.841 80.089.703

Intangible assets

Production costs 814.162 878.719


Marketing expenses 5.631 5.724

Other operating expenses 18.386 44.384

Total amortization expenses 3.999.918 4.100.652 Personnel expenses


1 January –

31 December 2018

Personnel expenses

Wages and salaries 119.492.084 86.115.719

Other social expenses 19.384.103 33.302.116

Provision for employee termination benefits, net

(Note 15)

7.200.684 4.499.035

146.076.871 123.916.870 21. Other operating income / expenses

Other operating income 1 January –


31 December 2018 Operational foreign exchange gains 12.445.474 30.469.260 Rent income (*) 6.381.230 3.417.551 Gain on sale of auxiliary materials 1.703.390 1.862.241 Late charges 3.627.698 336.623 Credit finance income arising from trading activities 8.032.611 48.886 Provision to make mine fields natural (Note 13)/(reversal)

- 1.475.381

Ready concrete plant installation service fee - 2.523.934 Other 3.331.953 4.038.327 35.522.356 44.172.203 (*) The contractor firm that built the Çanakkale bridge requested a backup facility for the production of ready-mixed concrete. The company has increased the capacity of this facility, which it previously rented from the third party, and allowed the plant to use ready-mixed concrete produced by the contractor. The footnote item consists of the rental invoices issued by the Company to the contractor company regarding the use of the facility.


(121)

21. Other operating income / expenses (continued) Other operating expenses (-) 1 January –


31 December 2018

Operational foreign exchange losses 16.097.408 27.539.765

Donations 3.865.148 5.467.585

Property and estate taxes 4.355.064 4.815.335

Credit finance charges arising from trading activities - 4.154.535

Expense of rented terminals 3.330.472 1.240.848

Legally disallowable expenses (*) 1.883.279 1.805.338

Provision for lawsuits (Note 13) 478.411 1.123.706

Indemnity and punishments 1.930.648 701.560

Provision to make mine fields natural (Note 13) - 18.644

Waste disposal costs 1.329.616 -

Other 898.077 1.173.230

34.168.083 48.040.546 (*) Consists of administrative fines, litigation and dues. 22. Income from investing activities

As of December 31, 2019 and December 31, 2018, income from investing activities are as follows:


1 January –

31 December 2018

Dividend income (*) 9.893.237 13.638.375

Gain on sales of fixed assets 60.739.165 22.036.236

70.632.403 35.674.611

(*) As of December 31, 2019 and December 31, 2018, details of dividend income are as follows:


1 January –

31 December 2018

Arpaş 9.825.732 7.485.760

Çimsa - 6.065.280

Eterpark 67.506 87.335

9.893.237 13.638.375

As of 31 December 2018 and 2017, the details of the expenses from investing activities are as follows:



Loss on sales of fixed assets - 10.609

- 10.609


(122)

23. Financial income and expenses

As of December 31, 2019 and December 31, 2018, details of financial income are as follows:

1 January – 31 December

2019

1 January –

31 December

2018

Financial foreign exchange gains 10.367.604 20.932.456

Interest income 12.732.941 18.812.076

23.100.545 39.744.532

As of December 31, 2019 and December 31, 2018, details of financial expenses are as follows:


2018

1 January –

31 December

2017

Financial foreign exchange losses 16.091.067 12.434.371

Interest expenses 138.887.007 87.688.828

Derivative instruments expenses - 19.766.287

154.978.074 119.889.486

24. Tax assets and liabilities (including deferred tax assets and liabilities)

As of December 31, 2018 and December 31, 2017, details of deferred tax assets and liabilities are as

follows:

(*) The net total of these two balances is presented in the balance sheet as deferred tax asset with the amount of TL 1.087.305

TL (31 December 2018 – 1.025.662 TL) and deferred tax liability with the amount of TL 41.431.249 TL (31 December 2018 – 35.902.130 TL).

Deferred tax assets (*) Deferred tax liabilities (*) Deferred tax income/ (expense)

31

December 2019

31

December 2018

31 December 2019

31 December

2018

1 January- 31 December

2019

1 January-

31 December

2018 Useful life and valuation differences on tangible and intangible assets

- - (28.997.312) (28.220.775) (776.537) 568.284

Goodwill - - (25.966.335) (25.941.416) (24.919) (24.919) Inventories 5.874.792 5.532.065 - - 342.727 559.796 Allowance for employee termination benefits

8.630.961 7.698.301 - -- 932.660 659.226

Allowance for unearned/unaccrued interest included in receivables and payables, net

482.141 1.574.916 - - (1.092.775) 747.304

Provision to make mine fields natural

898.338 607.458 - - 290.880 (297.530)

Other timing differences, net (including revaluation fund)

2.516.215 - - (292.418) 2.808.633 1.427.169

Derivative instruments - 4.348.583 - - (4.348.583) 4.348.583 Tax income/expense related with other comprehensive income

- 1.242.883 (916.103) - (2.158.986) 4.899.9174.

899.917 Effect of adjustments related to changes in accounting policies

- - (2.678.077) (1.426.065)

(1.252.012) (1.426.065)

18.402.447 21.004.206 (58.746.391) (55.880.674) (5.278.912) 11.461.765


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24. Tax assets and liabilities (including deferred tax assets and liabilities)(continued)

As of December 31, 2018 and December 31, 2017, movement of net deferred tax liabilities is as follows:


2018

1 January –

31 December

2017

Balance as at January 1 34.876.468 46.338.233

Previous Year correction difference 188.564 -

Charged to the income statement 3.643.340 (7.987.913)

Charged to the other comprehensive income (258.920) (4.899.917)

Changes in accounting policies 1.894.492 1.426.065

31 December, net balances 40.343.944 34.876.468

Deferred tax is calculated by using the liability method as the temporary differences between recorded

values and tax bases of assets and liabilities in the financial statements. This calculation is made by using

the enacted tax rates as of the date of the statement of financial position.

As of January 1, 2018, since the 3-year valid tax rate has changed to 22%, this rate is applied for the

deferred tax calculation as of December 31, 2018, for the temporary differences expected to be deferred

for 3 years (2018, 2019, 2020). However, since the corporate tax rate for the years after 2020 is 20%, the

tax rate applied to calculate expected to be incurred/closed temporary differences.

In Turkey, the corporate tax rate is 20%. However, in accordance with the addition of temporary 10th article

to the Corporate Tax Law, 22% corporate tax rate will be applied to the profits of the entities related to their

to 2018, 2019 and 2020 tax periods (for the entities with special accounting period, tax periods commenced

in the related year) rather than 20%. This rate is applicable to the tax base derived upon exemptions and

deductions stated in the tax legislation and by addition of disallowable expenses to the commercial

revenues of the companies with respect to the tax legislation. Corporate tax is required to be filed by the

twenty-fifth day of the fourth month following the balance sheet date and taxes must be paid by the end of

the fourth month.

In Turkey, the tax legislation does not permit a parent company and its subsidiaries to file a consolidated

tax return. Therefore, provision for taxes, as reflected in the consolidated financial statements, has been

calculated on a separate-entity basis.

Corporate tax losses can be carried forward for a maximum period of five years following the year in which

the losses were incurred. The tax authorities can inspect tax returns and the related accounting records for

a retrospective maximum period of five years. As of December 31, 2019, the Company does not have tax

loss (December 31, 2018 – TL 103.413).


(124)

24. Tax assets and liabilities (including deferred tax assets and liabilities) (continued)

Income tax payables as of December 31, 2019 and December 31, 2018 are summarized as follows:

31 December

2019 31 December

2018

Current income tax liabilities 6.807.220 49.980.521

Prepaid income tax (2.195.696) (45.686.767)

Current income tax liabilities, (net) 4.611.524 4.293.754

A reconciliation of income tax expense applicable to profit before income tax at the statutory income tax

rate to income tax expense reported in the income statements for the periods ended December 31, 2019

and December 31, 2018 is as follows:

1 January- 31 December

2019

1 January-

31 December

2018

Profit before tax and non-controlling interests 87.313.818 221.750.037

At the effective statutory income tax rate of 22 % (19.209.040) (48.785.008)

Income not subject to tax 12.062.648 10.177.052

Expenses that are not deductible (5.027.432) (4.500.886)

Tax losses - 22.751

Other (171.228) 1.093.483

(12.345.052) (41.992.608) 25. Earnings per share

Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary

shareholders by the weighted average number of ordinary shares outstanding during the year. As of

December 31, 2019 and December 31, 2018 weighted average number of shares is 19.144.706.825.

There have been no other transactions involving ordinary shares or potential ordinary shares since the

reporting date and before the completion of these financial statements.

Earnings per share and dividends per share distributed as follows:


2019

1 January –

31 December

2018

Net profit for the year 75.220.457 177.897.040

Average number of ordinary shares outstanding (kr 1 each) 19.144.706.825 19.144.706.825

Earnings per share (kr) (*) 0,393 0,929

Dividends distributed 152.712.298 128.001.510

Gross dividends per share (kr) (*) 0,798 0,669

(*) Since all shareholders have same rights and there is not preferred stock, common stock dividend diluted

earnings per share amounts do not differ.


(125)

26. Related party disclosures

Entities are defined as related if one of the entities has control over the other entity or has a significant

influence over the other entity’s financial and administrative decisions. The Company is controlled by Hacı

Ömer Sabancı Holding A.Ş. (39,72%) (December 31, 2018 – 39,72%) and Heidelbergcement Group

(39,72%) (December 31, 2018 – 39,72%). For the purpose of the consolidated financial statements,

shareholder companies, financial investments and its associates and subsidiaries and other Sabancı and

Heidelbergcement Group companies are presented separately and those companies and their senior

executives are referred to as related parties.

Related party balances as of December 31, 2019 and December 31, 2018 and related party transactions

for the years ended December 31, 2019 comprise mainly following:

Sales to related parties

1 January – 31 December 2019 1 January– 31 December 2018 Related Parties Product Service Other Product Service Other Shareholders Hacı ÖmerSabancı Holding A.Ş. - - 8.614 - - 6.764 Financial assets Çimsa Çimento Sanayi ve Ticaret A.Ş.

(Çimsa) 160.141 - 74.793 - - 43.025

Arpaş Ambarlı Römorkaj Pilotaj Ticaret A.Ş. (Arpaş)

- - 680.811 - 1.127.796 -

Other* HeidelbergerCement A.G. - - 1.312.456 - - 1.087.660 HC Trading Malta Ltd. 705.634.173 - - 316.383.277 - - Carrefoursa Sabancı Ticaret Merkezi

A.Ş. - - 6.360 - - -

Enerjisa Enerji - - 193.255 - - - Enerjisa Üretim Santralleri A.Ş. 1.802.785 -- 7.410.669 (*)They are related companies of the company partners.


(126)

26. Related party disclosures (continued)

Purchases from related parties

1 January – 31 December 2019 1 January – 31 December 2018 Related Parties Product Service Other (*) Product Service Other (*) Shareholders Hacı Ömer Sabancı Holding A.Ş. - - 1.257.376 - - 1.062.139 Financial assets Çimsa 3.254.710 - 511.126 - 919.192 15.511 Liman İşletmeleri ve Nakliyecilik A.Ş. (Liman İşletmeleri)

- - 2.138.765 - 1.948.370 497.298

Eterpark End. Ürün. İmal.Tic.İth.İhr.Paz.A.Ş.(Eterpark) - - 1.349.479 - 1.944.124 175.152 Altaş Ambarlı Liman Tesisleri Tic. A.Ş. (Altaş) - - 1.601.175 - - 1.453.801 Arpaş Ambarlı Römorkaj Pilotaj Tic A.Ş (Arpaş) - 3.174 5.000 6.779 -

Other (**) Aksigorta Sigortacılık A.Ş. - - 6.710.137 - - 6.497.679 Brisa Bridgestone Lastik Sanayi ve Ticaret A.Ş. - 304.454 - 293.745 Bimsa Uluslararası İş Bilgi ve Yönetim Sistemleri A.Ş. - - 844.226 - 176.799 4.352.831 Kardemir Demir Çelik San. Ve Tic. A.Ş. - - 3.655.558 6.496.589 - 10.778 Avivasa Sigorta A.Ş. - - 264.588 - 254.002 Teknosa İç ve Dış Tic. A.Ş. - - 58.878 - - 162.001 S.A.Cimenteries Cbr. - - - - - - Carrefoursa - - 346.400 - - 46.488 HeidelbergerCement A.G. - - - - - - HC Trading Malta Limited - - 67.703.040 - - - Enerjisa Üretim Santralleri A.Ş. - - 202.488.639 - - 2.848.236 Enerjisa Enerji A.Ş. - - 22.977.575 139.538.609 - - HC Technology Center - 1.116.905 - - 999.383 - Kordsa - - 2.661.264 - - 41.711 Enerjisa Elektrik Perakende Satış A.Ş. - - - - - - Temsa İş Makinaları İmalat Pazarlama ve Satış A.Ş. - - 153.612 - - 187.166 HC Green Trading - - 6.442.638 - - 601.252 (*) The majority of the assets consist of the purchase or sale of tangible assets, the due date difference and the foreign exchange difference. (**) Related companies of the Company's shareholders.


(127)

26. Related party disclosures (continued) Due from related parties Due to related parties

31 December 2019

31 December 2018

31 December 2019

31 December 2018

Shareholders Hacı Ömer Sabancı Holding A.Ş. - - 717.900 625.103 Total (*) - - 717.900 625.103 Financial assets Arpaş - 94.936 - - Çimsa 15.262 9.444 1.789.674 3.100 Liman İşletmeleri - - 172.871 374.849 Eterpark - - 371.019 265.390 Altaş - - 334.209 169.060 Total (*) 15.262 104.380 2.667.773 812.399 Other (***) Aksigorta Sigortacılık A.Ş. - - 44.767 35.144 Brisa Bridgestone Lastik Sanayi ve Ticaret A.Ş. - - 145.288 106.616 Teknosa A.Ş. - - 6.183 51.063 Bimsa Uluslararası İş Bilgi ve Yönetim Sistemleri A.Ş. - - 646.677 4.863.971 Avivasa Sigorta A.Ş. 8.148 19.412 - - Enerjisa Enerji A.Ş. - - - 67.770.272 Enerjisa Üretim Santralleri A.Ş. - - 68.370.227 - HeidelbergerCement A.G. 1.075.902 16.891 - - HC Trading Malta Ltd. 50.100.123 30.536.865 18.510.542 - Kardemir Demir Çelik San. Ve Tic. A.Ş. 1.960.557 550.627 424.260 1.987.634 Çukurova Dış Ticaret A.Ş. 5.442 5.442 - Temsa İş Makinaları İmalat Pazarlama ve Satış A.Ş. - - 51.724 73.517 HC TechnologyCenter - - 617.186 464.156 Kordsa - - 1.631.518 - Akbank 207.349 1.007.741 - - Total 53.357.521 32.136.978 90.448.372 75.352.373 Personnel (**) 131.105 240.479 2.069.378 1.663.056 Total 53.503.889 32.481.837 95.903.423 78.452.931 (*) Presented in "Current trade receivables/payables” accounts (Note 7). (**) Presented in "Other receivables/payables” accounts. (***) Related parties of Company shareholders


(128)

26. Related party disclosures (continued)

As of December 31, 2019, receivables from “Direct debit system” in trade receivables amounting to

TL 19.234.290 (December 31, 2018 – TL14.153.801) are receivables from Akbank T.A.Ş.

31 December 2019

31 December 2018

Deposit at banks

Akbank T.A.Ş. 102.347.486 106.982.437

Financial liabilities

Akbank T.A.Ş. 190.265.143 112.201.504


2018

1 January –

31 December

2017

Financial expenses to related parties

Akbank T.A.Ş. 11.414.219 27.792.876

Interest income from related parties

Akbank T.A.Ş. 6.533.181 5.733.312

Commission income

Arpaş 971.000 1.101.559

Donations

Sabancı Üniversitesi 119.423 95.350

Vaksa Hacı Ömer Sabancı Vakfı 2.012.500 3.162.000

2.131.923 3.257.350

Executive members’ remuneration


1 January –

31 December

2018

Short-term benefits provided to executive management 6.980.472 5.494.264

Post-employment benefits 1.212.040 2.337.632

Other long-term benefits 171.898 171.898

Total benefits 8.364.410 8.003.794

Employer’s social security premium portion 362.765 303.045


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27. Nature and level of risks arising from financial instruments Financial risk management objectives and policies

The Company’s principal financial instruments are bank borrowings, leasing, cash and cash equivalents.

The main purpose of use of these financial instruments is to raise finance for the Company’s operations.

The Company has various other financial instruments such as trade receivables and trade payables,

which arise directly from its operations.

The main risks arising from the Company’s financial instruments are foreign currency risk, interest rate

risks, credit risk and liquidity risk. The Company management reviews and agrees policies for managing

each of the risks as summarized below. The Company also follows market risk that arises from using

financial instruments.

Foreign currency risk

The Company is exposed to foreign currency risk due to the transactions made in foreign currency. This

risk occurs due to purchases, sales and bank borrowings of the Company which are denominated in

currencies other than the functional currency.

The Company’s net foreign currency position as of December 31, 2019 and December 31, 2018 are TL

49.676.709 long (asset) and TL 15.743.811 long (asset), respectively.

Foreign currency position of the Company is as follows:

Table of foreign currency position Current Period 31 December 2019 TL equivalent

(functional currency)

USD

Eur

GBP

AUD

SEK 1. Trade receivables 44.837.906 7.548.215 - - - - 2a. Monetary financial assets (including cash and bank accounts)

15.979.697

1.801.877

793.340

-

-

-

Toplam döviz varlıkları (1+2a) 60.817.603 9.350.092 793.340 - - - 3. Trade payables (50.344.536) (5.848.161) (2.346.449) - - - 4. Financial liabilities - - - - - - Total foreign currency liabilities (50.344.536) (5.848.161) (2.346.449) 0 0 0 Net foreign currency position 10.473.067 3.501.931 (1.553.109) Total fair value of financial instruments used for foreign currency hedge

Exports(*) 702.468.756 120.932.141 - - - - Imports(*) 208.847.215 32.554.833 4.604.785 13.462 60.480 45.660

Table of foreign currency position Current Period 31 December 2018 TL equivalent

(functional currency)

USD

Eur

GBP

AUD

SEK 1. Trade receivables 64.169.076 12.197.357 - - - - 2a. Monetary financial assets (including cash and bank accounts)

28.825.192 5.475.634 2.652 - - -

Toplam döviz varlıkları (1+2a) 28.825.192 5.475.634 2.652 - - - 3. Trade payables (43.317.559) (7.578.788) (492.965) - - - 4. Financial liabilities (78.913.500) (15.000.000) Total foreign currency liabilities (122.231.05) (22.578.788) (492.965) - - - Net foreign currency position (29.236.791) (4.905.797) (490.313) - - - Total fair value of financial instruments used for foreign currency hedge

(19.766.287) (3.757.206) - - - -

Exports (*) 320.661.429 66.200.067 - - - - Imports (*) 274.568.630 54.621.754 4.047.373 40.594 60.480 43.680

(*) Import and export figures cover January-December 2018 and January-December 2018


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27. Nature and level of risks arising from financial instruments (continued)

The following table shows the effect of a 20% depreciation of TL in the pre-tax profit level:

Foreign currency sensitivity analysis 31 December 2019 Profit/ loss Profit/ loss Appreciation of

foreign currency Depreciation of

foreign currency In case of 20% appreciation of USD against TL: 1- USD denominated net asset/ liability 4.160.434 (4.160.434) 2- USD denominated hedging instruments (-) - - 3- Net effect in USD (1+2) 4.160.434 (4.160.434)

In case of 20% appreciation of EUR against TL: 4- EUR denominated net asset/ liability (2.065.821) 2.065.821 5- EUR denominated hedging instruments (-) - - 6- Net effect in EUR (4+5) (2.065.821) 2.065.821 In case of average 20% appreciation of other exchange rates against TL: 7- Other foreign currency denominated net assets, liabilities - - 8- Other foreign currency hedging instruments (-) - - 9- Net effect in other foreign currency (7+8) - - Total (3+6+9) 2.094.613 (2.094.613) 31 December 2018 Profit/ loss Profit/ loss Appreciation of

foreign currency Depreciation of

foreign currency In case of 20% appreciation of USD against TL: 1- USD denominated net asset/ liability (5.161.782) 5.161.782 2- USD denominated hedging instruments (-) 3.953.257 (3.953.257) 3- Net effect in USD (1+2) (1.208.525) 1.208.525

In case of 20% appreciation of EUR against TL: 4- EUR denominated net asset/ liability (681.585) 681.585 5- EUR denominated hedging instruments (-) - - 6- Net effect in EUR (4+5) (681.585) 681.585 In case of average 20% appreciation of other exchange rates against TL: 7- Other foreign currency denominated net assets, liabilities (3.992) 3.992 8- Other foreign currency hedging instruments (-) - - 9- Net effect in other foreign currency (7+8) (3.992) 3.992 Total (3+6+9) (1.894.100) 1.894.100 There is not any effect of a possible change in foreign exchange rates to equity accounts of the

Company.


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27. Nature and level of risks arising from financial instruments (continued) Price risk

Price risk is a combination of foreign currency risk, interest rate risk and market risk. The Company

naturally manages its price risk by comparing the same foreign currency denominated receivable and

payables and assets and liabilities bearing interest. The Company closely monitors its market risk by

analyzing the market conditions and using appropriate valuation methods.

The company does not have any floating rate financial instruments. The Company has fixed rate loan.

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause

the other party to incur a financial loss. The Company manages its credit risk by limiting exposure to

any one institution and revaluing the credibility of the related institutions continuously. The total credit

risk of the Company is presented in balance sheet.

Concentrations of credit risk arise when a number of counterparties are engaged in similar business

activities or activities in the same geographic region, or have similar economic features that would cause

their ability to meet contractual obligations to be similarly affected by changes in economic, political or

other conditions. Concentrations of credit risk indicate the relative sensitivity of the Company's

performance to developments affecting a particular industry or geographic location.

The Company manages its credit risk by extending its operations to a large area and avoiding unwanted

concentration on people/groups in a specific area/sector. The Company requires collateral from its

customers when needed.


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27. Nature and level of risks arising from financial instruments (continued)

Current Period

Receivables

Deposit at banks

Trade receivables Other Receivables Related

party

Other party Related

party

Other party Maximum credit risk exposures as of report date (A+B+C+D+E) (1)

53.372.783 315.703.245

131.105 55.395.916 152.041.813

- Guaranteed portion of credit risk by guarantees, etc. - 295.503.950 131.105 - - A. Net book value of financial assets which are not overdue or not impaired (2)

53.372.783 293.955.179 131.105 55.395.916 152.041.813

B. Net book value of financial assets that conditions are reassessed and become not overdue or impaired (3)

- 13.736.234 - - -

C. Net book value of assets which are overdue but not impaired assets

- 8.011.832 - - -

- Under guarantee - 22.354.970 - - - D. Net book value of impaired assets - - - - - - Overdue (gross book value) - 21.063.962 - - - - Impairment (-) - (21.063.962) - - -

Prior period

Receivables

Deposit at banks

Trade receivables Other Receivables Related

party

Other party Related

party

Other party Maximum credit risk exposures as of report date (A+B+C+D+E) (1)

32.241.358 411.700.685 240.479 13.749.755 275.421.182

- Guaranteed portion of credit risk by guarantees, etc. - 227.193.795 240.479 - - A. Net book value of financial assets which are not overdue or not impaired (2)

32.241.358 386.333.508 240.479 13.749.755 275.421.182

B. Net book value of financial assets that conditions are reassessed and become not overdue or impaired (3)

- 9.522.587 - - -

C. Net book value of assets which are overdue but not impaired assets

- 15.844.590 - - -

- Under guarantee - 11.389.696 - - - D. Net book value of impaired assets - - - - - - Overdue (gross book value) - 17.243.698 - - - - Impairment (-) - (17.243.698) - - -

(1) When determining the amount, guaranties received and factors increasing the reliability of the loan are not considered. (2) Guarantees consist of letters of guarantee, guarantee cheques and mortgages taken from customers. (3) There has been no collection issues related to these customers in the past. Liquidity risk Liquidity risk is the risk that an entity will be unable to meet its net funding requirements. The risk is

mitigated by matching the cash in and out flow volume supported by committed lending limits from

qualified credit institutions.

At liquidation table, the breakdown of non-derivative financial liabilities in accordance with the maturities

is presented considering the period from balance sheet date to maturities per written and oral

agreements and considering undiscounted cash flows per agreement.


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27. Nature and level of risks arising from financial instruments (continued) 31 December 2019 Maturities per agreement

Carrying value

Contractual undiscounted

payment (=I+II+III+IV)

Less than 3 months (I)

Between

3-12 months (II)

Between 1-5 years (III)

Over 5 years

(IV) Non-derivative financial liabilities

832.210.413 965.900.133 395.835.928 227.681.420 205.490.447 136.892.338

Bank loans 396.825.519 397.562.111 35.290.063 212.272.049 150.000.000 - Financial lease liabilities 79.628.949 213.451.583 2.203.441 18.865.357 55.490.447 136.892.338 Trade payables 355.755.945 358.342.425 358.342.425 - - -

Carrying value

Contractual undiscounted payment

(=I+II+III+IV) Less than 3 months

(I)

Between 3-12 months

(II) Between 1-5 years (III)

Over 5 years

(IV) Derivative financial liabilities - - - - - - Derivative debts - - - - - - Maturities per agreement

Carrying value

Contractual undiscounted

payment (=I+II+III+IV)

Less than 3 months (I)

Between

3-12 months (II)

Between 1-5 years (III)

Over 5 years

(IV) Non-derivative financial liabilities

905.143.234 912.373.602 345.301.124 463.458.456 103.614.022 -

Bank loans 565.161.013 567.949.821 877.343 463.458.456 103.614.022 - Trade payables 339.982.221 344.423.781 344.423.781 - - -

Carrying value

Contractual undiscounted payment

(=I+II+III+IV) Less than 3 months

(I)

Between 3-12 months

(II) Between 1-5 years (III)

Over 5 years

(IV) Derivative financial liabilities 19.766.287 19.766.287 - 19.766.287 - - Derivative debts 19.766.287 19.766.287 - 19.766.287 - - Capital management

The primary objective of the Company’s capital management is to maximize shareholder value, provide

benefits to other stockowners and to keep the most appropriate capital structure to decrease the capital

cost.

The Company follows up the debt to equity ratio in the capital management in parallel with other

companies in the sector. This rate is calculated by dividing net debt to total equity.

31 December 2019 31 December 2018 Total liabilities 968.672.500 1.052.961.043 Less: Cash and cash equivalents (Note 4) 152.041.813 275.421.213 Net debt 812.299.439 777.539.830 Total shareholder’s equity 1.041.073.987 1.107.566.050 Total assets 191.447.068 191.447.068 Debt to equity ratio 0,80 0,70


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28. Financial instruments (fair value explanations and disclosures within the framework of hedge accounting)

Fair value is defined as the price to be obtained from the sale of an asset or to be paid in the transfer of

a liability in a ordinary transaction between the market participants at the date of measurement.

The fair values of financial assets and liabilities carried at amortized cost and cost are considered to

approximate their respective carrying values for the following reasons.

Monetary assets The fair values of balances denominated in foreign currencies translated at period-end exchange rates

are considered to approximate their respective carrying values. The fair values of certain financial assets

carried at cost, including cash and due from banks, are considered to approximate their respective

carrying values due to their short-term nature and negligible credit losses. The fair values of investment

securities are estimated based on the market prices at the date of the statement of financial position.

Trade receivables are measured at amortized cost using the effective interest method and the carrying

values of the trade receivables along with the related allowances for uncollectibility are considered to

approximate their respective carrying values.

Fair values of cost or amortized cost in the balance sheet values and fair values of financial liabilities:

The fair values trade payables and other monetary liabilities are estimated to approximate carrying value

due to their short-term nature. Bank borrowings are carried at amortized cost and the transaction costs

are added to the initial cost of the borrowing. The fair values of long-term bank borrowings with variable

interest are considered to approximate their respective carrying values, since the initial rates applied to

bank borrowings are updated periodically by the lender to reflect active market price quotations. It is

note that when fixed interest rate applicable as of balance sheet is applied, the fair values of long-term

bank borrowings with fixed interest are approximate their respective carrying values. The carrying values

of short-term bank borrowings are considered to be their fair values due to their short term nature.

Fair value hierarchy table The Company classifies the fair value measurement of each class of financial instruments according to

the source, using the three-level hierarchy, as follows;

Level 1: Market price valuation techniques for the determined financial instruments traded in markets

(unadjusted)

Level 2: Other valuation techniques includes direct or indirect observable inputs

Level 3: Valuation techniques does not contains observable market inputs


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28. Financial instruments (fair value explanations and disclosures within the framework of hedge accounting) (continued) As of December 31, 2019 and December 31, 2018, the Company’s assets at fair value and its levels are as follows:

31 Aralık 2019 Level1 (*) Level 2 Level 3 Assets indicated by fair value Financial assets Çimsa 110.145.485 - - Arpaş - - 33.627.428 Liman İşletmeleri - - 13.218.698 Altaş - - 625.779 Ambarlı - - 800.000 Eterpark - - 1.549.260 Total Assets 110.145.485 49.821.165 Liabilities shown at fair value

Derivative instruments - - - Total Liabilities - - -

31 December 2018 Level 1 (*) Level 2 Level 3

a) Assets indicated by fair value Financial assets Çimsa 91.585.728 - - Arpaş - - 33.627.428 Liman İşletmeleri - - 13.218.698 Altaş - - 863.473 Eterpark - - 1.549.260 Total Assets 91.585.728 49.258.859 Liabilities shown at fair value

Derivative instruments - 19.766.287 - Total Liabilities - 19.766.287 - (*) It is measured with market prices at the stock exchange as of the balance sheet date.

In the determination of fair value of Arpaş, Eterpark, Altaş and Liman İşletmeleri, the adjusted net asset

value (NAV) and discounted cash flow (DCF) were applied.

The DCF method estimates the value of an entity's equity from the estimated total value of the entity by

subtracting the market value of the debts used to finance its operations.

The total value of the entity consists of the following basic elements: The present value of the cash flows

from the activities of the foreseeable period and the total of the value of the other assets and securities

which are not mandatory for the activities. An estimate of the present value of the work that can be

associated with the activities after the estimated period.

The cash flow from the operations is equal to the difference between the cash inflows related to the

activities and the cash outflows allocated for the cash taxes to be paid. Cash outflows should include

working capital and fixed assets investments required to support the company strategies. The net cash

flow after tax refers to the cash values available to pay debts and dividends to shareholders (or to re-

invest in future business activities.



Notes to the consolidated financial statements as of December 31, 2019 (Currency - Turkish Lira (TL))

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28. Financial instruments (fair value explanations and disclosures within the framework ofhedge accounting) (continued)

Fair value hierarchy table (continued)

The ongoing value is calculated as follows:

The future cash flows can be considered as a steady rate of steady income (cash flows that continue to

increase at the same rate every year). The value of such a permanent income (the value of the entity at

the end of the projected period) is calculated by dividing the expected annual cash flow by the weighted

average cost of capital. The continuing value calculated in this way is reduced to the present value by

normal method.

Discount Rate: The discount rate refers to the expected return on the investment in a particular business

or project. This rate applies to the future cash flows of a business or project, taking into account the risk

premium expected by investors in addition to the normal return expected from a risk-free investment.The

discount rate used in the INA calculations is based on the weighted average cost of capital (WACC).

The weighted average cost of capital is the return on the return on equity of the shareholders and the

return on the return of the borrowers.

Beta: The beta multiplier shows the sensitivity of the additional returns of any company (returns over

risk-free returns) to the total additional returns on some market returns (investment index on Rf).

Therefore, it is one of the criteria of market risk (systematic risk), which is one of the two components of

risk according to the capital market theory. Beta multipliers on one indicate a higher fluctuation than the

market average. In our study, the beta of the group consisting of the peer companies was used in the

calculation of the discount rate.

Country Risk Premium: Compared to the developed markets, underdeveloped or developing countries

include additional risks that investors should take. Measuring these risks constitutes the risk premium

of that country. The most common method used to determine this premium is the calculation of the

difference between the government bonds of the country concerned and the government bonds of a

developed country.

According to the Adjusted Net Asset Value Method, the value of the share of the bit company is valued

with an asset-based technique that corrects the book value of the company according to the unrealized

value changes in the asset and liabilities of the company.

29. Subsequent events

None.


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Information on whether there are organizations outside the head office

General Directorate: Barbaros Mahallesi Kardelen Sk. No:2 D.124-125 Palladium Tower Ataşehir/İstanbul

Switchboard: 0 (216) 571 30 00 Fax: 0 (216) 571 31 11

The addresses of our workplaces other that our head office are as follows.

Cement, Ready-Mixed Concrete Facilities, Terminals and Sales Offices

NO SALES OFFICES ADDRESS

1 YARIMCA SALES OFFICE Rota Limanı Körfez / KOCAELİ

2 SAMSUN SALES OFFICE Güzelyalı Mah. 3003 Sok. No:2 Çamkoru Sitesi Atakum/SAMSUN

3 ÇANAKKALE SALES OFFICE İnönü Caddesi ÇTSO İş Merkezi No:141 Daire 14-15 Çanakkale

NO PLANTS ADDRESS

1 ÇANAKKALE PLANT Mahmudiye Beldesi 17640 Ezine / ÇANAKKALE

2 BÜYÜKÇEKMECE PLANT Mimar Sinan Merkez Mahallesi İçel Caddesi İdari Bina Sitesi No : 13-1/1 Büyükçekmece/İSTANBUL

3 SAMSUN LADİK PLANT İskaniye mah.Akpınar Mevkii Ladik / SAMSUN

NO TERMINALS ADDRESS

1 KARAMÜRSEL/YALOVA TERMINAL Balcı Mevkii SCA Fabrikası içi Kaytazdere-Altınova / YALOVA

2 ALİAĞA TERMINAL Nemrut Körfezi Ege Çelik Limanı Aliağa/İzmir

3 AMBARLI TERMINAL Marmara Mah. Liman Cad. No:45 Beylikdüzü/İstanbul

4 HOPA TERMINAL Orta Hopa Mahallesi Liman Caddesi 08600 Hopa/ARTVİN

5 MARMARA EREĞLİSİ TERMINAL Bahçelievler Mahallesi Limanyolu Caddesi 19/A Marmara Ereğlisi/Tekirdağ

6 DERİNCE TERMINAL Deniz Mahallesi, Liman Yolu Caddesi, No:21/2 Derince/KOCAELİ

7 TRABZON TERMINAL Trabzon Liman Sahası Çömlekçi Mah. Rıhtım Sok.No:31 Ortahisar/Trabzon

NO AGGREGATE PLANTS ADDRESS

1 AYAZAĞA AGGREGATE PLANT Cendere Yolu Önerler Petrol Karşısı Kemerburgaz-Eyüp / İSTANBUL

2 BURSA AGGREGATE PLANT Eski Kemalpaşa Yolu üzeri Kayapa Beldesi Nilüfer / BURSA

3 SARAY AGGREGATE PLANT Kavacık köyü Mevkii Saray / TEKİRDAĞ

4 DANAMANDIRA AGGREGATE PLANT Danamandıra Köyü Silivri/İSTANBUL

5 SAMSUN AGGREGATE PLANT Çamlıyazı Köyü mevkii Atakum/SAMSUN


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NO READY-MIXED CONCRETE PLANTS ADDRESS

1 ALİAĞA READY-MIXED CONCRETE PLANT 18.cd. No:4 Horozgediği Aliağa / İZMİR

2 KEŞAN READY-MIXED CONCRETE PLANT Yeni Muhacır Beldesi Cumhuriyet Mah. İstanbul Yolu Cad. No:123 Keşan/EDİRNE

3 MENEMEN READY-MIXED CONCRETE PLANT Kazımpaşa Mah. 1212 Sok. No:24 Menemen/İZMİR

4 YENİBOSNA READY-MIXED CONCRETE PLANT Yenibosna Merkez Mah. Cemal Ulusoy Cad. Bahçelievler/İstanbul

5 TEKİRDAĞ READY-MIXED CONCRETE PLANT Kayı Mah. Muratlı Cad. No:321 Süleymanpaşa Tekirdağ

6 SİLİVRİ READY-MIXED CONCRETE PLANT Alipaşa Mahallesi Fatih Sultan Mehmet Caddesi No:28 Silivri/İstanbul

7 MERZİFON READY-MIXED CONCRETE PLANT

İstanbul Yolu 1.km Alıcık yolu üzeri (26.27.H Pafta-291 Ada-5 nolu Parsel) Merzifon / AMASYA

8 SAMSUN 2 READY-MIXED CONCRETE PLANT Sanayi mahallesi İşcan Caddesi No:2 TEKKEKÖY- SAMSUN

9 TOKAT READY-MIXED CONCRETE PLANT Gökçe Köyü Tombulkaya Mevkii Tokat-Sivas Karayolu 10. km. TOKAT

10 ÇERKEZKÖY READY-MIXED CONCRETE PLANT Beylikçayır Mevkii Veliköy-Çerkezköy / TEKİRDAĞ

11 KEMERBURGAZ READY-MIXED CONCRETE PLANT Mimar Sinan Mah.Cendere Yolu No:29 Eyüp/İstanbul

12 BORNOVA READY-MIXED CONCRETE PLANT Ankara Yolu Üzeri No:194 Bornova / İZMİR

13 BÜYÜKÇEKMECE READY-MIXED CONCRETE PLANT Mimar Sinan Mah. Sultan Murat Caddesi No:12 Bağımsız Bölüm 1 Büyükçekmece/İstanbul

14 BÜYÜKKARIŞTIRAN READY-MIXED CONCRETE PLANT Yeni Mahalle D 100 Karayolu No:25 Büyükkarıştıran Lüleburgaz/Kırklareli

15 EDREMİT READY-MIXED CONCRETE PLANT Yolören mahallesi 930. Sokak No:4/1 Edremit/Balıkesir

18 BAŞKÖY READY-MIXED CONCRETE PLANT Başköy Mahallesi 493 İsimsiz Sk. No.10 Nilüfer/Bursa

19 NİLÜFER READY-MIXED CONCRETE PLANT Kayapa Mahallesi Bursa Yolu Caddesi No:24/1 Nilüfer Bursa

20 KAVAK READY-MIXED CONCRETE PLANT Kavak - Samsun karayolu Emirli Taş ocakları yolu 1. km Kavak/SAMSUN

21 SAMSUN III READY-MIXED CONCRETE PLANT Derecik Mahallesi Ovalar Caddesi 204 Sokak No: 2 İlkadım/SAMSUN

22 GEBZE II READY-MIXED CONCRETE PLANT Tavşanlı Mahallesi 4510 sokak No:37/2 Gebze/Kocaeli

24 IŞIKKENT BORNOVA READY-MIXED CONCRETE PLANT Egemenlik Mahellesi Işın Caddesi No:3 Bornova/İZMİR

25 FİKİRTEPE READY-MIXED CONCRETE PLANT Merdivenköy Mahallesi Veril Sokak No:2 Kadıköy/İstanbul

26 GELİBOLU READY-MIXED CONCRETE PLANT Sütlüce Mücavir Mahallesi 13052 Sokak No:2 Gelibolu/Çanakkale

27 ÇORLU READY-MIXED CONCRETE PLANT Cumhuriyet Mahallesi Ali Osman Çelebi Bulvarı No:135/A Çorlu Tekirdağ

28 LAPSEKİ READY-MIXED CONCRETE PLANT

Gazi Süleyman Paşa Mahallesi Dumlupınar Cad. DLYS Adi Ortaklığı Beton Tesisi No: 6/2 Lapseki / Çanakkale

29 TUZLA READY-MIXED CONCRETE PLANT Postane Mahallesi Rauf Orbay Caddesi No:107 Tuzla /İstanbul

30 BANDIRMA READY-MIXED CONCRETE PLANT Edincik Mahallesi, Küçükkoru Kümeevler No:10 Bandırma

31 ESENKENT 2 READY-MIXED CONCRETE PLANT Selahaddin Eyyubi Mahallesi 1340 Sok. No:5 Esenyurt/İstanbul